Stocks were mixed on Monday, with the major benchmarks essentially flat, though declining issues outnumbered advancing ones. The Dow Jones Industrial Average (DJINDICES:^DJI) closed down slightly, but the S&P 500 (SNPINDEX:^GSPC) eked out a gain.
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As for individual stocks, Hasbro (NASDAQ:HAS) reported sharply lower sales and profit, but gave investors hope that its slump is nearing an end. Elsewhere, Alcoa Corporation (NYSE:AA) tumbled in response to lower aluminum prices.
Hasbro convinces investors better days are ahead
Toymaker Hasbro reported earnings that missed expectations badly, mostly due to the liquidation of Toys R Us in the U.S. and the U.K., but investors ultimately looked past that debacle, and shares closed up 4% after opening down 4.3%. Revenue decreased 15.7% to $716 million, compared with the average analyst estimate of $819 million. The company lost $112.5 million, or $0.90 per share. After adjusting for one-time charges relating to Toys R Us, severance costs from corporate restructuring, and the impact of tax reform, the company earned $0.10 per share -- still far below expectations for $0.34.
Domestic sales were hit the hardest by the liquidation, but European sales also declined due to "inventory overhang." Sales in the U.S. and Canada fell 19% and international sales dropped 17%. The entertainment and licensing segment grew revenue by 21% to $64 million.
In the conference call, Hasbro officials expressed confidence that the liquidation will be over mostly in the first half, with less impact on the all-important holiday season. Also, the company pointed out that new products, such as the Black Panther product line, will not be affected much, and global retailers view the failure of Toys R Us as an opportunity to build share, working with Hasbro on aggressive growth plans.
Investors had been bracing for bad news for this quarter, and apparently are now starting to look with some optimism on Hasbro's brand strength and prospects for the second half of the year and 2019.
Alcoa tumbles on aluminum sell-off
Aluminum prices tumbled, taking Alcoa shares with them, after the U.S Treasury Department extended a deadline for enforcing sanctions against Russian aluminum producer United Company Rusal. Alcoa, which had risen 26% since the announcement of sanctions on April 6, closed down 13.5%.
The Trump administration had levied sanctions on more than three dozen Russian individuals and entities on April 6 in response to "worldwide malign activity," including alleged meddling in U.S. elections. The inclusion on that list of Oleg Deripaska meant that his company, Rusal, would be cut off from access to the international financial system, and that news sent aluminum prices soaring.
"RUSAL has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries," said Treasury Secretary Steven Mnuchin in today's press release. "RUSAL has approached us to petition for delisting. Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL's petition."
The new directive extends the deadline for the sanctions from June 5 to October 23. The market's response suggests that investors believe that a solution may emerge between now and then that will result in aluminum output from Rusal continuing to flow in international markets, to the detriment of Alcoa's profits.