Soft game sales weigh on Hasbro's 2Q earnings

Toy maker Hasbro Inc. said Monday its second-quarter net income dropped 25 percent on weak sales in most categories as revenue in major product categories including boys, girls and games declined.
But higher prices and cost-cutting helped the maker of Monopoly, Nerf and My Little Pony beat analysts' earnings expectations. Its shares rose 4 percent.
The second quarter is seasonally small for toy makers, which make the bulk of their sales during the second half of the year and the holiday season. But it can give indications about the strength or weakness of toy demand.
Revenue fell 11 percent in the latest quarter, missing Wall Street expectations. That drop reflected lower sales in Hasbro's boys, girls and games categories. Hasbro said that was partly planned, because the company is working to make inventory more in line with when people buy toys, later on in the year.
"(We've) focused on aligning our shipments with the strongest periods of consumer demand," CEO Brian Goldner said. "As a result it is not surprising to see our U.S. and Canada net revenues down through the first six months. However, we are very encouraged about the quality of our execution and the profitability improvements we are delivering."
The results from Hasbro were in contrast with its larger rival Mattel Inc., which said last week its second-quarter net income rose 20 percent on lower costs and strength in its Barbie and American Girl dolls.
Hasbro's net income fell to $43.4 million, or 33 cents per share, for the period that ended July 1. That's down from $58.1 million, or 42 cents per share, a year ago. But it is flat with adjusted results from a year ago, excluding one-time items last year for a tax adjustment and investments in Hasbro's gaming business.
Analysts expected earnings of 24 cents per share, according to a FactSet survey.
Revenue for the company declined to $811.5 million from $908.5 million, short of the $832 million analysts expected.
Revenue for the entertainment and licensing unit surged 59 percent to $43.2 million, thanks to the syndication of television programs like My Little Pony in both the U.S. and abroad.
Games revenue fell 8 percent. A shift in consumer spending from board games to smartphones and tablets has been hurting the maker of Scrabble, Monopoly, Operation, and other classic games. A year ago, Hasbro restructured its games division.
On Monday Goldner said the company plans to stabilize the category this year, and start expanding it next year.
Hasbro has also been expanding its game brands into movies, with mixed results. "Battleship," based on the classic game, was a disappointment in the U.S., but did well internationally. An adaptation of "Ouija" is due out next year.
Boys' revenue fell 8 percent as higher sales of Marvel products were offset by weaker sales of Transformers and Beyblade, a spinning top game.
Girls' revenue fell 13 percent despite higher sales of My Little Pony products.
Hasbro said some girls' toys that will be available this holiday season include Baby Butterscotch, a miniature horse, from Furreal Friends, and Baby Wanna Walk from Baby Alive.
Goldner said in a statement that the toy maker expects its full-year earnings per share and revenue will increase, when excluding the stronger dollar's impact.
Shares of Hasbro rose $1.35, or 4 percent, to close at $35.19 Monday. The stock is up 10 percent since the beginning of the year.