Where have you gone, Anakin Skywalker? Toymaker Hasbro (NYSE:HAS) suffered in the quarter ended in June as the waning popularity of the Star Wars franchise affected the company's top and bottom lines. Net revenues dipped by 8% to $527.8 million. Profits came in at $0.07 a share, or $0.08 before stock-based compensation. A year earlier, Hasbro reported earnings of $0.13 a share, which would have been $0.11 per share if stock-based compensation had taken a nibble.
If that doesn't sound too stock-affirming, take heart in knowing that Wall Street actually thought things would be even worse. Analysts had pegged Hasbro to earn $0.07 a share on a 10% decline in net revenues. The share price already had the slowdown of Star Wars, now far removed from George Lucas' latest trilogy installment, baked in. Darth Maul? Yes. Dearth mauled? No.
That's the way it goes with these licensing deals. Last week, Mattel (NYSE:MAT) earned twice as much as the market was expecting on the strength of merchandising pacts tied to Disney's (NYSE:DIS) Cars and Time Warner's (NYSE:TWX) Superman Returns. By this time next year, those same playthings will be clearance-bin fodder at best.
Hasbro's second-quarter results reflect a difference of $84.8 million in Star Wars-related sales. Absent that, Hasbro would have actually seen its top line climb more than 8% higher. That's not an entirely fair assessment, because we aren't deducting any new licensed lines from the current quarter, but it is indicative of how important Star Wars has been to the toymaker's performance in recent years.
The one thing that we can applaud Hasbro for is its appetite for buying back its own shares. This past quarter alone, the company repurchased roughly 10 million shares. With the price in the high teens, it's getting a better deal than when its shares peaked in the low $20s two years ago.
Toy companies earn the bulk of their profits in the second half of the year, as retailers load up on hot holiday playthings. More than a few Fools will be watching how the 2006 season fares, given that Mattel is an Inside Value newsletter service selection, while Hasbro has been recommended by David Gardner for his Stock Advisor subscribers.
Yoda man, Hasbro. Let's hope the resurgence in your more conventional toys and board games makes you a stocking staple this year.
Disney and Time Warner are also Stock Advisor picks. If you're interested in seeing what other stocks David Gardner has recommended to subscribers of the Motley Fool Stock Advisor newsletter service, take afree trial. On average, the newsletter's portfolio is currently beating the market by more than 30 percentage points.
Longtime Fool contributor Rick Munarriz is a kid at heart, and he does own shares in Disney. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
