Hasbro (HAS)
Coming off of the holiday season, retailers continue to be an important gauge of how consumers are responding to the recovery. Some retailers’ results are still showing an area of concern while others have easily exceeded analysts’ expectations. The holiday shopping season was a pivotal time for most retailers as they tried to recover from a year of disappointing results fueled by the Great Recession. Now that the busiest shopping time of the year has wrapped up, fourth-quarter results are starting to pour in. Hasbro Inc., the toy manufacturer, reported a stronger-than-expected quarterly profit. How was the company able to exceed analysts’ expectations? Will the same level of momentum spill over into subsequent quarters or will the company shift back into reverse?
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Stock Analysis
Hasbro Inc. said its fourth-quarter profit climbed 77% to $165.6 million, or $1.09 a share, as revenue rose to $1.38 billion from $1.23 billion. These results were pretty impressive given the current state of the economy and a record high unemployment rate. Luckily for Hasbro, its product offerings are very popular during the holiday shopping season. Toys are a big revenue generator for most retailers as shoppers purchase millions of the hot commodity for family and friends. Hasbro’s better-than-expected earnings came on the heels of Mattel’s (MAT: Charts, News, Offers) 86% increase in fourth-quarter earnings. While both companies were able to smash through expectations, the major contributors to their success came from opposite segments of their businesses.
During the fourth-quarter, demand for boy toys tied to the Transformers movie and board games lifted earnings. Revenue in Hasbro’s boys’ segment jumped 16%, and game-and-puzzle sales rose 18%. Sales for girls’ products increased 4%. This is a common occurrence for most toy manufacturers. As popularity for movies based off of cartoons or comic books increases, so does the popularity for products related to these productions. If these toys are released at the same time or soon after the movie, this can result in elevated sales for the manufacturer. Combine this with the most popular shopping time of the year and success is easily achieved. Hasbro’s rival Mattel was able to beat results by improving sales of its signature Barbie product line.
Now that the holiday shopping season is a distant memory, many people are wondering if toy manufacturers’ earnings will take a hit. This is a very likely possibility. There will definitely be a noticeable change as consumers slide cash back into their wallets and spend less on the latest toys. However, Hasbro is more confident about performance in future quarters. Chairman and Chief Executive Brian Goldner projected higher revenue and earnings per share this year, taking into account the company’s joint venture with Discovery Communications Inc. to form a new children’s television network.
Overall, Hasbro is still in a very shaky place. It does not take much to tip the earnings scale in the wrong direction during these volatile times. However, Hasbro is positioning itself to be in great place if things continue to improve. Hasbro rose 12 percent to $34.36 in New York Stock Exchange composite trading after gaining as much as 13 percent, the biggest intraday jump since February 2001.
Other Stocks in the News
- CVS Caremark Profit Rises – CVS Caremark Corp. (CVS: Charts, News, Offers) posted a bigger-than-expected rise in quarterly profit.
- SAP’s CEO Resigns – The abrupt resignation of SAP AG (SAP: Charts, News, Offers) Chief Executive Leo Apotheker was shocking to say the least.
- Amazon Gets an Upgrade – An analyst upgraded Amazon.com Inc. (AMZN: Charts, News, Offers) on the belief that Wall Street is underestimating the power of the Kindle.
