Hasbro Inc. (HAS) reported first quarter earnings of 40 cents per share. Excluding a favorable tax adjustment, the company reported earnings of 26 cents per share. The results were well ahead of the Zacks Consensus Estimate of 16 cents a share. Hasbro had earned 14 cents per share in the year-ago period.
The better-than-expected results were driven by a strong demand for its product lines. With a recovery in the economy, the company is experiencing favorable consumer spending trends.
Hasbro continues to return wealth to investors. Concurrent with the earnings release, the company has announced additional $625 million shares repurchase authorization. The company has also increased its dividend by 25% to 25 cents. The dividend is payable next month.
Inside the Headline Numbers
Net revenues for the quarter increased 8% to $672.4 million from the prior-year quarter. Excluding the positive impact of foreign exchange, revenues were up 5% in the quarter. Operating profit was $69.3 million, up 68.2% year-over-year. Operating margin increased 370 basis points from the prior-year period to 10.3%. Total EBITDA increased 36.6% to $100.3 million.
Hasbro experienced growth across major product categories. The Boys category increased 3% to $236.9 million while the Games and Puzzles category grew 7% from the prior-year period to $227.0 million. The Girls category was up 16% to $129.4 million while the Preschool category grew 18% from the prior-year period to $78.9 million.
The U.S. and Canada segment’s net revenues were up 5% year-over-year to $424.7 million. Operating profit in the segment increased to $61.1 million from $41.6 million in the year-ago quarter.
The International segment reported net revenues of $221.7 million, up 17% year-over-year. The segment has also narrowed its operating loss to $2.4 million from a loss of $14.5 million reported a year ago.
However, the Entertainment and Licensing segment experienced a slight decrease in revenues in the quarter. Net revenues in this segment decreased to $25.1 million from $27.2 million reported in the year-ago quarter. The decline stemmed from reduced licensing revenue in digital gaming. Operating profit was down to $9.4 million from $13.6 million reported a year earlier.
Regarding expenses, we noticed that royalty expenses for the reported quarter were down 19.6% from the prior-year period to $43.8 million. Product development expenses totaled $40.3 million, up 8.6% year-over-year. While advertising expenses were up 14.2% from the prior-year period to $71.2 million, the company also reported a 7.5% increase in selling, distribution and administration expenses to $173.7 million.
Outlook
Hasbro expects both revenue and earnings to increase in 2010. However, management pointed out that the comparisons in the second quarter would be tough, as in the last year the company had shipments of movie-based toys for the Transformers and G.I. Joe movies.
Last Friday, Hasbro’s rival Mattel Inc. (MAT) reported its first earnings results. Mattel reported a first quarter earnings of 7 cents per share, which was quite surprising considering that the company was expected to report a loss of 2 cents per share according to the Zacks Consensus Estimate. The better-than-expected results were primarily driven by strong sales of its core brands and its licensed toy lines, particularly the newer ones.
Hasbro’s strong product line-up and strategic association with Discovery, Universal Pictures and Electronic Arts bode well for investors. Additionally, the company’s meaningful international growth opportunity and its expense management efforts should provide a boost.
Read the full analyst report on “HAS”
Read the full analyst report on “MAT”
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