While Hasbro CEO Brian Goldner notes that Toys “R” Us’ September bankruptcy filing has undoubtedly impacted Hasbro’s bottom line, the Rhode Island-based toymaker saw its revenue rise by 7% to US$1.8 billion in Q3 2017. Net earnings for the third quarter, meanwhile, grew 3% to US$265.6 million, while operating profit decreased slightly to US$360.9 million (compared to US$362.1 million last year).
Toys “R” Us, along with certain of its US and Canadian subsidiaries, voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the US Bankruptcy Court for the Eastern District of Virginia on September 18. Moving into the holiday season, the retailer’s 1,600 Toys “R” Us and Babies “R” Us stores around the world will continue to operate, along with its e-commerce sites. The company announced it will work with investors, debt holders and other creditors to restructure its US$5.2 billion in long-term debt, due between 2018 and 2021.
In light of the bankruptcy filing, Hasbro has updated its projection for Q4 2017, lowering its expectations to see gains of 4% to 7% over the same period last year. According to Goldner, TRU’s bankruptcy has had a negative impact on the toymaker’s quarterly revenue and operating profit. However, he said the company’s brand blueprint strategy is driving growth despite “short-term retailer disruption” and challenging economic environments in territories like the UK and Brazil.
In terms of category sales, Hasbro’s gaming sect continues to lead growth. The segment saw a 22% increase in net revenue for a Q3 total of US$280.1 million, thanks in part to new social games including Speak Out and Fantastic Gymnastics (pictured). The company’s total gaming category—including Magic: The Gathering and Monopoly, which are included in Franchise Brands revenue—was up 4% to US$424.8 million. This momentum follows growth in the Gaming division in Q2 (with revenue increases of 6% to the tune of US$133.9 million) and Q1 (with a 43% jump in revenue to US$142.9 million).
Sales for Hasbro’s Franchise Brands grew by 7% to US$827.3 million, driven largely by Nerf, Transformers, My Little Pony and Monopoly. The company’s Emerging Brands division also saw an increase in revenue (up 9% to US$198.4 million) due to Baby Alive and Furreal Friends.
Hasbro’s Partner Brands segment, however, saw revenue decrease by 2% to US$485.7 million. While brands like Beyblade, Star Wars, Disney Descendants and Sesame Street posted revenue gains in Q3 2017, this growth was offset by declines in brands like Yo-Kai Watch and Dreamworks’ Trolls.
The Entertainment and Licensing segment saw a 4% increase in net revenue (up to US$58.4 million in Q3 2017) and its operating profit increased by 20% to US$16.9 million. This growth sees the segment account for 28.9% of Hasbro’s total net revenue for Q3 2017 (up from 25.1% of net revenue last year).
Hasbro’s Q3 net revenues in the US and Canada segment increased by 7% to US$993.8 million, though operating profit for the segment declined by 5% (US$217.3 million compared to US$228 million in Q3 2016). Internationally, net revenues increased by 7% to US$739.2 million, while operating profits were US$132 million (down 1% from last year). These international revenues include a favorable US$27.9 million impact from foreign exchange. On a regional basis, revenue was up in Europe (3%), Latin America (13%) and Asia Pacific (17%).