Hasbro says worst of Toys R Us collapse damage is behind it

Published on: 24th April 2018

The company believes retailers like Walmart and Target will help fill the void, as first-quarter revenue and profit fall short of estimates.

The demise of Toys R Us took a toll on Hasbro last quarter, but the company says the worst is behind it.

Hasbro posted declining sales in all business areas, after the world’s largest toy chain announced the liquidation of its operations in the US and UK. Hasbro’s shares initially declined, only to rebound after CEO Brian Goldner told investors the impact would lessen going forward as retailers, such as Walmart and Target, likely expand their toy offerings.

“We’re working aggressively around the world to put the impact of Toys R Us behind us,” Brian said. “Importantly, this is not something happening to our company.”

The Toys R Us bankruptcy has presented a hurdle for the company, yet Hasbro reiterated on Monday that free-cash flow this year would be $600m to $700m and that operating profit would be at the same level, a positive sign. Brian also said the company stopped shipping to Toys R Us in January and that the liquidation of the chain’s US stores will be completed this quarter.

Shares of Hasbro gained as much as 3.7% in New York Monday, after falling as much as 4.6%. The stock had slid 8.9% this year through to Friday’s close.

The Toys R Us effect could be clearly seen in Hasbro’s first-quarter results. In North America, sales sank 19%, while revenue in Europe declined 28%. The liquidation also generated expenses of $61.4m.

Brian has said that revenue will take a hit this year, but declined to give more specific sales guidance. He said the company would update investors later this year.

“The opportunity to absorb all of the Toys R business is present for our remaining retail partners,” he said. “We are just building those plans to do that, but it takes some time.”


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