Hasbro blames Toys R Us liquidation for lackluster sales

Key Points
  • Hasbro blames the Toys R Us liquidation for its weaker-than-expected earnings in the first quarter.
  • The toy maker's portfolio took a big hit in the quarter, with sales of toys in all of its categories falling.
  • CFO Deborah Thomas says the numbers "do not reflect the health of our underlying business."
The board game Monopoly by toymaker Hasbro at a toy store in New York City.
Getty Images

Shares of toy maker Hasbro plummeted in premarket trading Monday after the company posted weaker-than-expected earnings following the liquidation of Toys R Us.

"As we discussed earlier in the year, our first quarter was expected to be difficult," CEO Brian Goldner said in a statement Monday. "We are working to put the near-term disruption from Toys R Us behind us."

Hasbro warned in February that residual effects from the bankruptcy of Toys R Us would weigh heavily on the brand for the first two quarters of 2018. Toys R Us said announced its liquidation last month.

Here's what Hasbro reported compared with projections by a Thomson Reuters survey of analysts:

  • Adjusted EPS: 10 cents vs. 33 cents expected.
  • Revenue: $716.3 million vs. $814 million projected.

The share price was down nearly 9 percent in the premarket. After the market open, shares were down about 3.3 percent.

Hasbro reported a net loss of $112.5 million, or 90 cents per share, in the first quarter ended April 1, compared with a profit of $68.6 million, or 54 cents per share, a year earlier.

Excluding items, the company earned 10 cents per share, far less than the 33 cents analysts has expected. Total revenue fell 16 percent to $716.3 million, well below estimates of $814 million.

"Our underlying financial strength is sound, and despite the near-term challenges associated with a major customer liquidation, Hasbro is positioned to manage a challenging 2018 and drive growth in 2019 and beyond," Deborah Thomas, Hasbro's chief financial officer, said in a statement. "The quarter's revenue and profits were negatively impacted by lower revenues and higher expenses associated with events that do not reflect the health of our underlying business."

Hasbro's portfolio took a big hit in the quarter. Sales of franchise brands, like Nerf, Monopoly and My Little Pony, fell 19 percent and partner brands which include "Star Wars," "Frozen" and "Marvel" merchandise, slumped 6 percent in the fourth quarter.

Hasbro gaming, which includes a variety of board games and digital gaming, fell 22 percent in the quarter, and emerging brands, which includes Baby Alive and Furreal Friends toys, fell 6 percent. The company said that Tyler the Tiger was the top toy sold during the holiday period.

"New Hasbro initiatives shipping in this quarter and beyond won't be caught up in the Toys R Us liquidation process," Goldner said. "With the rapid shift to a converged retail environment, we accelerated plans we originally had spread throughout the year to transform our commercial organization on a more immediate basis."