The company said that tariffs linked to the US-China trade dispute affected sales to retailers.
Hasbro has posted weaker than expected third quarter earnings. The company said adjusted earnings for the three months ending in September came in at $1.84 per share, down 4.6% from last year and falling short of forecasts of $2.21 per share.
The company reported that group revenues were largely flat compared to last year at $1.58b, but again missed analysts’ estimates of $1.71b. The company sources more than two-thirds of its US products from China and tariff disputes between the two countries have forced Hasbro to rework its supply lines, and retailers to delay taking shipments.
Brian Goldner, CEO at Hasbro said: “Hasbro remains on track to deliver profitable revenue growth in 2019, behind innovation in gaming, toys and around Hasbro’s Brand Blueprint. 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.”
He added that the company still faces the prospect of more direct import cancellations and shifts to domestic orders as December 15th approaches, the day when tariffs on most of Hasbro’s product lines are likely to go into effect.
The tariffs threat has overshadowed the company’s push into content media. As part of that strategy, Hasbro has agreed to buy Entertainment One for about $4b, adding popular pre-school brands such as Peppa Pig and PJ Masks to its portfolio. Last year, the company spent about $520m on children’s entertainment and merchandising franchises, including Power Rangers.
Deborah Thomas, CFO, added: “Third quarter operating profit was negatively impacted versus last year from lower Entertainment, Licensing and Digital segment margins, a higher revenue mix of lower margin Partner Brands and incremental shipping and warehousing costs which partially offset our cost savings. We anticipate disruption throughout the remainder of 2019 as retailers work to manage costs and inventory, and we are working to mitigate the impact on consumers this holiday season.”
Hasbro shares fell by 10.4% in pre-market trading immediately following the earnings release.