The Hasbro Reports Full-Year and Fourth Quarter 2017 Financial Results and the Q4 & Full Year 2017 Earnings Management Remarks have been published. I encourage everyone to read them through thoroughly. We have also printed part of it and you can read it by clicking through. Many factors are involved with Hasbro Q4 earnings, and they are making changes to address the issues, including launching new line looks closer to movie release dates. Click through for more!
For the quarter, point of sale increased in all categories other than Partner Brands. However, after ten months of strong consumer takeaway, the industry and our business slowed in November and December. We’ve identified three significant factors:
First, we did not ship or sell through as much as we expected in support of the late fourth quarter release of Star Wars: The Last Jedi. As a result, Hasbro’s STAR WARS revenues declined, and performed below expectations in the quarter and for the year. Historically, the brand would deliver a revenue surge in film years, and shrink the following year. Instead, we are seeing a pattern like other properties which have films every year, such as MARVEL, where STAR WARS should maintain a large, more sustainable year-in and year-out revenue level. Recognizing this and working with Disney, we can better plan our business with improved visibility, sustainability and profitability over the long term.
As the film has gained a wider audience, point of sale in early 2018 has significantly improved, and is up year to date including strong growth in online sales. We are working closely with Disney Consumer Products and Interactive Media to continue to drive innovative brand experiences over the coming years, and in the near term to leverage the upcoming home entertainment window for The Last Jedi and to ensure that retail is positioned to take new inventory in support of the May release of Solo: A Star Wars Story.
Going forward, merchandise on-shelf dates will be closer to movie promotional activity and premiere dates. Importantly, STAR WARS remains a tremendous property and opportunity – one in which Hasbro is deeply committed. In 2017, STAR WARS ranked as the #1 global property in the toy and game industry, according to NPD, and we look forward to driving this success for years to come.
Second, revenues declined 8% in Europe during the fourth quarter. STAR WARS contributed to our European decline, but as we have discussed throughout 2017, the region was also affected by a weakening U.K. economy as Brexit negatively impacted consumer and retailer confidence. This impact was more severe than expected late in the year. During the weeks leading up to the holidays, retailers became increasingly risk averse as on-line grew dramatically and UK retailers focused on minimizing inventory and maintaining margins.
Several U.K. retailers are cutting staff and stores, and profitability was impacted as we
partnered with them to work through in-store inventory. For the year, NPD estimates the UK toy and game market declined 3% and we estimate the EU5 markets declined slightly.
Across the European region, Ecommerce is growing rapidly, representing an even bigger piece of the market during the holiday, and disrupting traditional retailers’ business models. We’ve invested in a global omni-channel strategy to make Hasbro brands available everywhere consumers shop. We are working through inventory carry over in Europe, and anticipate we will face headwinds while we address these changing market dynamics during the year, particularly in the first half.
Third, our outlook for the fourth quarter reflected a higher level of uncertainty due to the September Toys“R”Us bankruptcy. This uncertainty materialized, and our business with Toys“R”Us was impacted in the quarter about as we expected. We continue to partner with Toys“R”Us to support their turnaround, while managing our risk and inventory. We estimate less than half the stores in their announced closures directly affect our initial plans, but we also expect Toys“R”Us to streamline inventory at remaining stores. Much of this impact will be felt in the first two quarters of the year. We anticipate during 2018, that we will right size our business with Toys“R”Us while leveraging our omni-channel model to ensure product is available throughout our retailer network to meet consumer demand. The development of our omni-channel product and channel strategy is aligned with where retailers are expanding, notably in emerging markets in Asia and Russia, and also in growing channels in developed economies.
Despite the slower end to the year, our Brand Blueprint strategy is working.
For more information, check out Hasbro’s Investor Relations website.
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