Hasbro Inc (HAS) announced disappointing preliminary sales results for the fourth quarter and fiscal 2010. The company expects to report its full results on February 7, 2011.
The Pawtucket, Rhode Island–based company expects to report total revenue of $1.3 billion for the fourth quarter of 2010, down 7% year over year as demand for toys was below its expectations during the crucial holiday season. We believe the demand was low due to tough weather conditions and price increases by retailers.
Toy maker Hasbro also projects fiscal 2010 sales to dip 1.7% from the prior year to $4.0 billion. Segment wise, net revenues from the U.S. and Canada are expected to plunge in the reported quarter and 2010, whereas international segment net revenue is expected to rise.
However, Hasbro expects a modest year-over-year increase in earnings per share for 2010, compared with $2.48 reported in 2009. Management believes that it will be able to achieve its tenth consecutive year of earnings growth in 2010, despite reduced revenue driven by its product and cost-saving initiatives and international expansion. Moreover, Hasbro continues to return wealth to investors and, therefore, we expect the company’s forward earnings to benefit from accretion of share buyback.
The company remains optimistic regarding 2011 based on its strong product line-up slated for 2011 and 2012, as well as its strategic associations with Discovery, Universal Pictures and Electronic Arts. Though we believe sales of the company will be negatively impacted as order placement from retailers will be low since they already have inventory after a sluggish holiday period.
One of its rivals LeapFrog Enterprises Inc (LF) also experienced a slowdown in consumer demand during the holiday season, resulting in a reduction in the 2010 earnings outlook.
The Zacks Consensus Sales estimates for the fourth quarter of 2010 and fiscal 2010 are $1.33 billion and $4.05 billion respectively. The Zacks Consensus EPS Estimate for the fourth quarter of 2010 is $1.08 (reflecting a year-over-year decline of 0.8%) and for fiscal 2010 is $2.69 (reflecting a year-over-year growth of 8.6%).
Earnings estimates have remained unchanged over the last 30 days. Hence, we do not foresee any surprises during earnings and expect the company to report in-line results.
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