Monday, 22 July 2013

Hasbro Q2 Net Falls 16% in Boys Toy Sales


Hasbro 2nd-Quarter Net Falls 16% on Sharp Drop in Boys' Toy Sales

Thanks very much to Hasbro for this unique invite. Some interesting listening for sure.

  • US/Canada fell to $389m 2013 from $407m 2013 a -4% shrinkage
  • Europe fell to 186m 2013 from 198m 2013 a -6% shrinkage
  • Latin America broke even @83m 2012+2013 0%
  • Asia/Pacific fell 72m 2013 from 79m 2012 a -10% drop.
  • Russia, China, Brazil continue to grow positive trend. Focus will shift to strengthen this trend (give them more exclusive Boys Toys Nerf, Transformers, GI Joe, because they can afford it apparently.)

Over all Total Net Revenues $766m 2013 down from £811m 2012 - a shrinkage of -6%.

Not all doom gloom - what was the major drive this time last year? Elite?

Let's hope that Nerf sales continue to  increase on the whole..

The pressure is on for Hasbro to perform well in the Toy Industry, after last week, larger rival Mattel posted a much weaker-than-expected profit on sluggish Barbie doll sales, and smaller toymaker Jakks Pacific slashed its full-year forecast - saying several retailers in the USA and Europe had cut orders for its key products.

Hasbro, which counts retailers Wal-Mart, Target and Toys R Us among its customers, said sales fell 6 percent to $766.3 million. Analysts had projected $794.7 million.

Hasbro advise that further costings are likely to increase by $8m due to pensions (they sacked a ton of people if you recall). Pre tax Pension charges have already cost $2.5m.

Hasbro also said it has expanded its partnership with Walt Disney Co, giving it the rights to make toys and games for Marvel characters such as the super popular Spider-Man, the Avengers and Iron Man through 2020. Hasbro's rights for the Star Wars franchise, which Disney bought recently, also runs through 2020.

It should be noted that Hasbro shares have climbed more than 26 percent this year.


Below are the flagship products Hasbro hope to pull in healthy profits for 2013 Q3 and Q4.


Boys. Uh oh. Houston we have a problem.
 
The fact they listed the Mega Centurion as their flagship blaster that will pull them out of the loss quarters. Sure ZS or the Rapidstrike is more prominent here? The Mega Centurion is a Q4 product, which won't make up for Q2 and Q3 losses. Yep this is usually a slow period for toy makers, but it seems a bit hide their heads and hope it passes quickly.

Also that they will be putting more exclusives towards Russia, China and Brazil. I don't understand the shift away from "bringing Nerf back home" to the US fans. Mattel had noted a shift recently for kids over to electronics. I think this is an age old battle but toy makers can innovate with technology more. Why not create open source apps for smart phone interaction? Right now the LTAR and Rebelle App are currently outgunned by competition such as Tek Recon.
  
You can get additional reading at WallStreetJournal.


I only did A-Level Business Studies (got a B) but this goes against what I learnt when fire fighting a deficit in market...? Anyone help me out here?

8 comments:

  1. I fail to see what the problem is from a business point of view. Are you implying that them using the flagship Centurion is a poor choice to market what is also one of their flagship lines? Or is it one of their other products?

    Hasbro is going to be unable to react to these sales figures publicly for at least another three years. N-Strike Elite probably easily cut into their profit margins considerably due to developement costs, and frankly, N-Strike Elite's idea to use reshells was probably a poor idea from a marketing point of view anyway... We older Nerf fans certainly aren't complaining, but younger kids and their parents certainly are going to have a harder type justifying it.

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    1. He's concerned about the Centurion being the flagship because the revelation of it being reverse plunger has soured it's reputation with the NIC. To put it bluntly, lots of people don't want to buy it anymore.

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    2. this is true. i know i dont want anything to do with the centurion anymore. i can get better and more consistent ranges with my longstrike.

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    3. Keep in mind, the NIC's opinion of the Centurion makes next to no impact on the market's reception of the toy. We do not drive Nerf's sales, we're just a niche market that they occasionally tap into.

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  2. The NIC is a tiny proportion of the overall sales revenue for the Nerf market.

    MLD, I have a couple of problems with your analysisFirst up, the Centurion is a sensible choice: it has a nice flag-ship factor in that it can hit 100ft and still be safe. Whether the NIC hates it or not is irrelevant, they only engage blogs and the like because they like the extra noise but it's small fry compared to the sheer clout of having products front of house in places like Target and Toys R Us.

    Second, the BRIC markets have massive emerging middle classes. Middle classes with disposable for the first time. Granted, western values in terms of play might not transplant but it makes solid business sense to capture markets early as they emerge rather than trying to muscle in later on. I'd cite the UK's Tesco as an example, they've tried to crack the US market dozens of times and failed: the US is simply too crowded and they don't offer anything different.

    To the guy that said about Elite causing a dent: it wouldn't have in these figures. Ranges are designed and developed way ahead of time. Think about it, it takes months for a container ship to get to Europe and the US from Hasbro's Chinese factories not to mention the time it takes to produce and get everything through regulatory compliance for every country they're selling in. All of the development and production would have been done in 2011 if not earlier.

    This is a drop in the ocean: a blip. As it was pointed,their shares have grown 26% this year, they're clearly doing something right. :)

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    1. Oh, absolutely, but there has to be time after deployment to market for the profits to level off. I suppose that it might depend on how you want to measure it, as either production unit cost or price-per-unit with development, but I would think that it would take significant time to actually show the profits from the lineup roll in. Elite is still young and mostly untested; hence why I'm thinking something akin to a three year time frame until Hasbro can accurately react to these sales figures and consider how to combat them during this time frame in the future since they're likely part of a longer reaching trend of Q2 sales figures dating back several years.

      But you're absolutely right, in the end this is not a huge concern for them. Besides, their ultimate enemy in this whole marketing battle being interactive electronics and video games is probably what they're truly still worried about.

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    2. it depends on accounting, if they utilised credit to move the liabilities into this quarter for some of the research and development, which would have been very sensible if they were assuming elite would be successful - R&D costs could be part of it.

      Accounting in creative fashions to move profits and liabilities around is a very common practise.

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  3. In the article I read from ToyNewsOnline, they said Nerf was the only brand in boy's toys that saw a rise in sales for Hasbro. It sounds like you left a major point out of your article.

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