Hasbro tanks as trade-war tariffs and a pending acquisition bite into toy profits
- Hasbro on Tuesday reported weaker-than-expected earnings and revenue for the third quarter, prompting shares to tumble as much as 11% in early trading.
- Profits saw increased pressure from US-China tariffs and the pending acquisition of media company Entertainment One.
- The company anticipates continued "disruption" in the fourth quarter and is "working to mitigate the impact on consumers," CEO Brian Goldner said in the report.
- Watch Hasbro trade live here.
Hasbro reported weaker-than-expected profits and revenue in the third quarter as the US-China trade war and a pending acquisition cut into margins.
The toymaker's stock tumbled as much as 12.4% in early Tuesday trading, hitting its lowest levels since late August.
Adjusted earnings per share fell below the lowest estimate from analysts surveyed by Bloomberg. Profits were squeezed by tariffs between the US and China, as the bulk of Hasbro's manufacturing occurs in the latter nation.
"Hasbro remains on track to deliver profitable revenue growth in 2019, behind innovation in gaming, toys and around Hasbro's Brand Blueprint," CEO Brian Goldner said in the company's report. "However, as we've communicated, the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail."
Here are the key numbers:
Revenue: $1.58 billion, versus the $1.72 billion estimate
Adjusted earnings per share: $1.84, versus the $2.21 estimate
Partner brands revenue: +40%, versus -37% in the year-ago period
Hasbro Gaming revenue: -17%, versus 0% in the year-ago period
Operating margin: 10%, versus 20% in the year-ago period
The company also took a 16-cent hit to earnings per share from a foreign-exchange loss related to its acquisition of media company Entertainment One. The outlet produces popular children's shows including "Peppa Pig" and "PJ Masks." Hasbro anticipates the purchase will close before the end of 2019.
North American revenues decreased 2% year-over-year, with franchise brands and Hasbro Gaming seeing slower growth over the period. Revenue from partner brands and emerging brands grew year-over-year in North America and internationally, according to the report.
The company's chief executive anticipates continued "disruption" through the fourth quarter as toy retailers cut costs and inventory to prop up their margins. The toymaker is "working to mitigate the impact on consumers" ahead of the holiday season and has upcoming partnerships with "Star Wars" and Disney's "Frozen 2," Goldner said.
Hasbro closed Monday at $120.16 per share, up roughly 48% year-to-date.
The toymaker has 10 "buy" ratings, five "hold" ratings, and one "sell" rating from analysts, with a consensus price target of $124.88, according to Bloomberg data.
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