Hasbro reports earnings rise, lower revenue in third quarter

Monday, October 18th 2004, 10:19 am
By: News On 6

PROVIDENCE, R.I. (AP) _ Hasbro Inc., the nation's second largest toy maker, reported higher earnings for the third quarter compared with results depressed by an accounting charge a year ago. But revenue fell as sales in its domestic toy and games segments slipped.

Company executives warned its revenue target for the year may not be met, partly due to the effect of high gasoline prices and energy prices on consumer spending.

The Pawtucket-based company said Monday it earned $88.7 million, or 45 cents per share, for the quarter ended Sept. 26 compared to earnings of $68.5 million, or 38 cents a share a year ago. The 2003 figures were depressed by $17.3 million due an accounting change.

Analysts surveyed by Thomson First Call were looking for earnings of 51 cents a share for the latest quarter.

Sales were $947.3 million for the quarter, down about 2 percent from the $971.1 million generated a year ago.

``Our plan this year has been to grow both revenues and earnings. In that context, we view our third quarter top-line performance as disappointing,'' said Alfred Verrecchia, Hasbro's president and chief executive officer. ``With the difficult revenue comparisons, a challenging retail environment and continued softness in our boys business, it was clearly more difficult to grow revenue than anticipated.''

Verrecchia said the company remains confident it will achieve earnings growth for the rest of the year.

``We continue to believe we will achieve our goal of delivering an operating margin of 12 percent or better by 2005,'' he said. ``However, given our top line performance year-to-date and the uncertain retail environment, it is increasingly unlikely that we will achieve our goal of revenue growth for 2004.''

Verrecchia said the company's revenues for the rest of this year would more likely be flat, or decrease, than increase, citing ``conservative retailers,'' moderate growth in people's wages and less spending by consumers dealing with high gasoline and energy prices.

``Our concern about the fourth quarter is just the overall sluggishness at retail as well as increased prices on home heating oil and gasoline, and the impact they will have on consumer spending,'' he said.

Looking ahead to the shopping season, Verrecchia said: ``It's too early to know what the consumer will do. We tend to remain in the camp that the holiday season will be good, but not a record breaker.''

For the first nine months of the year, Hasbro earned $114.1 million, or 54 cents a share, compared with $81.07 million, or 45 cents a share, a year ago. Revenue fell to $1.94 billion from $2.01 billion a year ago.

The company's domestic toy sales slipped $369.7 million for the quarter from $377.3 million a year ago. Chief Financial Officer David Hargreaves noted weakness in those products targeted at boys. He also pointed to sales of Beyblade, which declined $30.4 million.

Sales in the games segment declined, but the international segment had a 1-percent gain.