Hasbro (NASDAQ:HAS) is learning to do more with less.
The toy and games retailer just closed the books on a disappointing year that saw both revenue and profits fall. For the whole of 2012, sales dropped by 2% and adjusted earnings were about 10% below 2011 levels.
Those results lagged the performance from rival Mattel (NASDAQ:MAT). The Barbie maker managed to boost its full-year sales by 2% -- and expand earnings by 13% -- on a strong showing from the Fisher-Price and American Girl brands. Mattel also closed out its second year with over $1 billion in operating profit.
The major drag on Hasbro's earnings came from a 13% drop in its Boys category. Disney's (NYSE:DIS) Marvel-branded products, tied to theatrical releases from The Avengers and Spider-Man, sold well for the company. But they were nowhere near as successful as the previous year's Transformers and Beyblade toys and games.
The challenging sales environment has convinced Hasbro to switch gears a bit, from a focus on growth investment to a strategy of cost cuts. After years of plowing money into the business, CEO Brian Goldner said that the company "began an important next step in realizing our full potential as brand builders, with the implementation of a cost savings initiative designed to better align resources and costs." Hasbro hopes to get more agile with its cost structure and deliver $100 million in annual savings by 2015.
The strategy is already starting to bear fruit. Despite the dip in sales last year, Hasbro managed to increase profitability, boosting its operating margin up from 14.2% to 14.7%. The company also squeezed 15% more profit from the U.S. and Canada geographies, even though sales fell by 6% there.
But the most immediate benefit that investors will see from Hasbro's more-from-less strategy is in the company's ninth dividend hike in 10 years. Hasbro's earnings might have fallen, but its dividend just increased by 11%. And that brings its current yield to 4%, good enough to beat Mattel's and most of the rest of the market, too.