Hasbro Takes a Hit With the Collapse of Customer Toys ‘R’ Us

• April 23 2018
• Matthew Townsend

The demise of Toys “R” Us Inc. took a toll on Hasbro Inc., which posted worse-than-expected results in the first quarter.

The demise of Toys “R” Us Inc. took a toll on Hasbro Inc., which posted worse-than-expected results in the first quarter.

Hasbro posted declining sales in all business areas in the quarter, sending shares down as much as 9.1 percent in early trading. The toymaker said the drop was a result of the Toys “R” Us liquidation, as well as “uncertainty” in some operations and excess inventory in Europe.

“We are working to put the near-term disruption from Toys “R” Us behind us,” Chief Executive Officer Brian Goldner said in a statement.

The retailer, one of Hasbro’s largest customers, filed for bankruptcy in September, had a terrible fourth quarter and then announced the liquidation of several divisions, including the U.S. This has presented another hurdle for toymakers that were already dealing with slowing growth and concerns that the success of making so many products based off an ever-growing slate of kids entertainment is waning.

The Toys “R” Us effect could be clearly seen in Hasbro’s results. In North America, sales sank 19 percent. Revenue dropped even more in Europe with a decline of 28 percent. The liquidation also generated expenses of $61.4 million.

The world’s largest publicly traded toymaker, based in Pawtucket, Rhode Island, lost $112.5 million in the quarter, versus a profit of $68.6 million a year earlier. Sales of franchise brands, which include Transformers and My Little Pony, collapsed 19 percent to $361.7 million.

Growth Plans

Goldner has said that revenue will take a hit this year, but other retailers, like drugstores and dollar chains, will fill the market void left by Toys “R” Us by 2019.

Read More: The World’s Biggest Toymakers Aren’t Having Much Fun

“Our global retailers view this as an opportunity in a key consumer category and are partnering with Hasbro to develop growth plans for our brands,” he said.

Shares of Hasbro dropped as low as $75.30 in premarket trading. They had declined 8.9 percent this year through Friday’s close.

The first quarter, which runs through March, is Hasbro’s smallest by revenue. This is usually when toymakers are rebuilding inventory for the rest of the year.

Overall sales in the period sank 16 percent to $716.3 million, the company said. Analysts had estimated $821.2 million on average. Excluding the Toys “R” Us costs and other items, profit dropped to 10 cents a share, compared with projections for 32 cents.

— With assistance by Jonathan Roeder