Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Here's What Caused Hasbro to Drop Over 17% Early Tuesday

By Daniel Miller - Oct 22, 2019 at 12:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Hasbro missed top- and bottom-line estimates, but some of the challenges were out of management's hands.

What happened

Shares of Hasbro, Inc. ( HAS 0.25% ), a worldwide entertainment company producing toys and games, among other products, traded as much as 17.7% lower early Tuesday after the company released disappointing third-quarter results. But part of the problem may be out of the company's hands.

So what

Revenues moved slightly higher, compared to the prior year's third quarter, to $1.58 billion, but that result missed analysts' estimates calling for $1.72 billion. Adjusted net earnings checked in at $233.8 million during the third quarter, or $1.84 per share, which also lagged far behind analysts' estimates calling for $2.21 per share. Despite misses on the top and bottom lines, there were bright spots in the data, including a 40% surge in Partner Brands revenue, which includes products using popular Marvel and Star Wars characters, among others. That third-quarter surge in Partner Brands revenue was just enough to offset 8% and 17% declines in Franchise Brands and Hasbro Gaming, respectively.

A Star Wars action figure toy.

Partner Brands revenue is a bright spot, thanks to products from popular franchises such as Star Wars. Image source: Hasbro.

"The team drove continued growth in the Wizards of the Coast gaming brands, MAGIC: THE GATHERING and DUNGEONS & DRAGONS, and delivered significant new holiday initiatives. To start the fourth quarter, we are seeing a strong consumer response to the global launch of Hasbro's line for Disney's Frozen 2 and Star Wars: The Rise of Skywalker as well as the U.S. launch of the new NERF Ultra," said Brian Goldner, CEO of Hasbro, in a press release.

Now what

It was a disappointing third quarter for investors, but it's important to note that part of the challenge was from the U.S. and China tariff woes -- something investors must now consider when investing in consumer goods stocks. Perhaps the largest challenge of the tariff talks is the implementation dates, which have moved from September to roughly two weeks before Christmas. That's caused some orders to be changed or canceled by retailers, and some orders couldn't be filled with new specifications. The silver lining is that management noted Hasbro is on track to reduce China sourcing to 50% by the end of 2020, compared to China's accounting for roughly 67% in 2018.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hasbro, Inc. Stock Quote
Hasbro, Inc.
HAS
$98.62 (0.25%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.