By MAE ANDERSON, Associated Press
NEW YORK (AP) — The toys wars are heating up, with Hasbro planning to beef up spending on advertising after reporting that its third-quarter results fell by 4 percent.
Hasbro, whose toys include My Little Pony, Transformers and Scrabble, said Monday that its results were hurt by weakness in toys for boys and preschool and the stronger U.S. dollar. But the Pawtucket, R.I.-based company's adjusted results topped Wall Street's forecasts on Monday. And Hasbro remains confident heading into the critical holiday season, which is when toy makers can earn up to 40 percent of annual revenue.
Hasbro is optimistic despite that the holidays are expected to be a tough battleground for toy makers because retailers are ordering inventory more cautiously. In addition, retailers including Wal-Mart, Kmart and Toys R Us have beefed up layaway and reservation services to encourage shoppers to buy toys early in the season, meaning they might be scarce later on.
Chief Financial Officer Deborah Thomas said Hasbro plans to boost toy sales during the holiday season "with a significant increase in marketing support in an environment of significantly lower U.S. retail inventory." That includes spending of 30 percent to 40 percent more, in terms of dollars, than it did a year ago.
"The team has done a great job of not only looking at traditional media but digital and social media and you'll see our brands showing up in all those places — everywhere consumers are interacting with brand," CEO Brian Goldner said during the call.
For the three months ended Sept. 30, Hasbro Inc. earned $164.9 million, or $1.24 per share. That compares with $171 million, or $1.27 per share, a year earlier.
Removing the impact of the stronger dollar, earnings were $1.28 per share. A reduction in the number of outstanding shares through repurchases helped boost earnings per share by about 2 cents. Analysts, on average, expected profit of $1.20 per share, according to FactSet.
Revenue slipped 2 percent to $1.35 billion from $1.38 billion. Revenue totaled $1.39 billion excluding unfavorable foreign exchange rates. Wall Street forecast $1.38 billion, on average.
Revenue in the U.S. and Canada edged up 1 percent, helped by solid sales of girls' products and games. This was somewhat offset by weaker sales of preschool toys and boys' products. Overseas revenue fell 7 percent, hurt by the stronger dollar. When the dollar is strong, international sales translate into fewer dollars back at home.
Girls' toys showed the most growth, with revenue up 17 percent. Sales were helped by the launches of the latest Furby robotic pets and One Direction boy band dolls. New products available for the holiday season — including interactive doll Baby Alive Baby Wanna Walk, animatronic animals Furreal Friends Baby Butterscotch and Bouncy My Happy to See Me Pup also posted strong results in the period.
The softest category was boys, which was hurt by expected drop-offs in sales of Transformers and Beyblade, a spinning top game.
Sales in Hasbro's games category were flat. The company, which owns well known games such as Scrabble and Monopoly, has been working to turn around results in this category as more people turn to electronic games. It is launching board games based on smartphone games such as Angry Birds and Farmville, in an effort to improve results.
Hasbro said that it still expects its full-year earnings per share and revenue to climb, when stripping out the impact of foreign exchange rates.
Hasbro shares fell 66 cents to close at $38.39 Monday.
Hasbro's report followed larger rival Mattel Inc.'s more upbeat third-quarter results last week. The company said its net income rose 22 percent, helped by strong sales of its Monster High Dolls and Fisher Price toys.
Associated Press Writer Michelle Chapman contributed to this report.
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