Transformers aren't just titans at the box office, they're flying off toy shelves, too. Toy maker Hasbro Inc. said Monday strong sales of the morphing robots helped its second-quarter profit rise past analyst expectations.
Summer movie tie-in toys have been one bright spot for toy makers during the consumer-spending slowdown. Hasbro has been buoyed in recent years by toys tied to movies, including this summer's hit "Transformers: Revenge of the Fallen" and the upcoming "G.I. Joe: "The Rise of the Cobra."
"We couldn't be more pleased with the performance both at the box office and at retail," said CEO Brian Goldner. "Retailers around the world recognize that certain brands like Transformers bring to life the entire store for consumers, which translates into premium placement and representation across multiple departments for those brands."
Still, weak international sales due to the stronger dollar and costs related to a joint venture crimped results.
Profit for the three months ended June 28 rose to $39.3 million, or 26 cents per share, from $37.5 million, or 25 cents per share, last year. Excluding costs related to its joint venture with Discovery Communications to form a TV network, income was 32 cents per share. That beat analysts expectations of 23 cents per share, according to Thomson Reuters.
Revenue edged up 1 percent to $792.2 million from $784.3 million last year, missing analyst expectations of $797.1 million. Excluding the adverse affect of the stronger dollar, net revenue rose 7 percent.
In the U.S. and Canada, sales rose 5 percent to $490.9 million from $467.7 million, boosted by sales of Transformers and G.I. Joe toys. Other strong sellers in the region were Littlest Pet Shop, Nerf, Play-Doh and Furreal Friends.
Internationally, sales fell 6 percent to $276.2 million from $293.7 million, hurt by the stronger dollar. Transformers and G.I. Joe toys were also among the better sellers internationally.
One weak spot was games and puzzles. Hasbro owns a multitude of game titles including Scrabble and Monopoly — and sales in that division fell 17 percent. But Hasbro said that was due to the timing of shipments for promotional programs rolling out over the next few months.
Hasbro also said the joint TV network will cost less than previously expected due to lower financing and amortization costs. The Pawtucket, R.I.-based company now expects the venture will hurt 2009 earnings by 15 cents to 20 cents per share, compared with a previous estimate of 25 cents to 30 cents per share.
Hasbro expects the project to hurt 2010 earnings by 25 cents to 30 cents per share, compared with the 30 cents to 35 cents per share previously forecast.
The network is scheduled to debut in fall 2010 and will air children's programing, including a New Zealand show called "The WotWots" and other programs built around Hasbro brands such as Romper Room and Trivial Pursuit.
Stifel Nicolaus analyst Drew Crum said the results were "generally positive," as the lower-than-expected revenue was offset by Hasbro's guidance on the TV network venture. He rates the company "Hold."
Next year's Hasbro movie tie-ins will include "Iron Man 2" and "Toy Story 3." It is also developing movies with Universal based on its best-selling board games such as Candyland and Monopoly and its "Stretch Armstrong" line.
The second quarter is small for toymakers, who make up to 50 percent of annual sales during the holiday season. On Friday, rival Mattel Inc. — light on summer-movie tie-in toys this year — said its sales sank 19 percent in quarter, but cost cuts and lower inventory helped it post an 82 percent jump in profit, beating analyst expectations.