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Hasbro, Inc. (HAS)
Hasbro's 3Q Earnings Top Expectations
The holiday shopping season is quickly approaching and retailers will soon become the center of conversations on and off the street. Consumers will be discussing which stores have the best deals and investors will be paying attention to sales figures from retailers. Initial reports are suggesting that the figures will be slightly better than last year, but lackluster to say the least. These are valid predictions given the amount of Americans looking for jobs or working for less pay. The toy industry always looked forward to hoards of consumers flocking to stores to purchase the “hot” toys of the year for family and friends. Hasbro Inc., the world's second- largest toymaker, has already reported an increase in sales before the most popular shopping season. How was the company able to top expectations? Is this an indication that the same type of results will spill over into the fourth quarter?
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Toys are definitely not considered a necessity, so it was surprising that Hasbro was able to report a larger-than-expected profit in the third quarter. Net income rose to $150.4 million, or 99 cents a share, from $138.2 million, or 89 cents, a year earlier. However, revenue declined 1.7 percent to $1.28 billion, driven down by foreign exchange rates. A surge in interest for boys' toys linked to this year's action-packed Transformers and GI Joe movies helped to boost quarterly results. Strong interest in these toys was able to counteract declining sales in toys geared towards girls and pre-school games. Hasbro also watched revenue from entertainment and licensing more than doubled to $41.6 million thanks to the success of movies based on their toys. Investors shouldn't be so quick to praise the third quarter results because sales still fell 2 percent and earnings were boosted higher by a major cost-cutting strategy implemented by the company. Regardless, Hasbro still performed finished the quarter better off than Mattel (MAT: Charts, News, Offers) so investors are choosing to stay positive about future earnings.
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Now that the hype over the Transformers and GI movies is dying down, Hasbro may find it more difficult to deliver positive results in the fourth quarter. Unless the company has another blockbuster movie based on one of their toys, sales may continue to decline and bring profits down with it. It's hard to pinpoint how earnings will turn out especially since consumer sentiment has fluctuated so much over the last year. If Hasbro slashes prices on popular toys, earnings may not head down the wrong road. Unfortunately, the success or failure of retailers rest in the hands of consumers and during these times anything can happen.
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Hasbro may have been able to beat third quarter expectations, but the fourth quarter is shaping up to be a challenge for the toy company. If sales continue to decline, cost-cutting will likely be more extensive sooner rather than later. As pointed out earlier, toys are not a necessity and consumers may begin crossing them off their holiday shopping lists if things remain shaky. Shares of Hasbro were recently down 1.17, or 4%, to $28.35.
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More Stuff on Hasbro
Hasbro names 2 execs to new programming unit -- Hasbro has announced two executives to head a newly created division.
Hasbro updates Clue to include text messaging -- Yes, text messaging has come to that oldest and most venerable of mysery games, Hasbro's Clue.
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Other Stocks in the News
BB&T Q3 profit plunges to $157M -- The Winston-Salem, N.C.-based bank reported a steep decline in 3Q profit.
Eaton profit tops forecast, shares gain -- Eaton (ETN: Charts, News, Offers), a maker of hydraulics, electrical control systems and truck transmissions posted a higher-than-expected quarterly profit.
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