'Star Wars' toys may not be enough to save Hasbro from Toys R Us bankruptcy woes

  • Hasbro is slated to report fourth-quarter earnings on Wednesday, but one analyst doesn't see the company beating Wall Street's expectations.
  • Toys R Us represented 9 percent of Hasbro's total sales in 2016 and 14 percent of its sales in the U.S. and Canada.
  • Sales of "Star Wars: The Last Jedi" toys could be disappointing, despite being higher than last year's sales of "Rogue One" toys.
Star Wars figurines
Getty Images

Hasbro is slated to report fourth-quarter earnings on Wednesday, but Davidson analyst Linda Bolton Weiser said she doesn't expect the company to beat Wall Street's expectations.

Residual effects from Toys R Us' bankruptcy weighed heavily on rival Mattel's earnings during the crucial holiday period, and Weiser foresees a similar impact on Hasbro.

Hasbro relies heavily on Toys R Us to sell its toys to consumers. In 2016, the toy retailer was tied with Target as the second-largest seller of Hasbro goods, accounting for 14 percent of Hasbro's sales in the U.S. and Canada.

As Toys R Us continues to shutter locations, Weiser estimated that Hasbro's sales growth will be negatively impacted by about 1 to 1.5 percent.

Another blow to the company's earnings could come from weaker-than-expected sales of Hasbro's entertainment and partner brands.

While Weiser foresees sales of "Transformers" toys being greater than the $500 million forecast, she said that sales of "Star Wars: The Last Jedi" toys could be disappointing, despite being higher than last year's sales of "Rogue One" toys.

"Our Partner Brands estimate of 8 percent could be too high as 'Stars Wars' could have been below expectations," she wrote.

She also questioned whether or not sales of "My Little Pony" tied to the theatrically released film helped boost sales of the brand, which has been declining for several years.

In addition, Weiser wondered if Hasbro would be able to hit its overall sales guidance for the quarter.

"HAS based its 4Q17 sales guidance of 4 to 7 percent on industry growth of 3 to 4 percent, which came in down [year over year], so the consensus sales estimate of 5 percent could have downside risk," Weiser wrote.

According to NPD Group, the toy industry only grew by 1 percent in 2017.

"HAS does, however, have a track record of successful holiday execution even in difficult environments, and historically has shown good expense control, so we believe there could be less bottom-line than top-line risk," Weiser said.

Hasbro is slated to report fourth-quarter 2017 earnings before the opening bell on Wednesday.