Hasbro Working to Tighten Star Wars Toy Release Window

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Hasbro is working with Disney to tighten the window between when toys hit retail shelves and a film is released after suffering sluggish sales of Star Wars-related products during the holiday season, CEO Brian Goldner told analysts. “We have to move the merchandising closer to when the marketing for the property starts,” he said.

The sales generated by the Force Friday promotion last September in advance of Star Wars: The Last Jedi didn’t match those that accompanied a similarly-labeled program behind Star Wars: The Force Awakens in 2015, Goldner said. While sales were strong in September and October, business slowed in November and December, leaving Hasbro with “pockets of heavy inventory,” largely in Europe where closeout sales are underway, Hasbro executives said. Hasbro’s Q4 (ended Dec. 30) sales in Europe were down 8% at $460.4 million, while those in the U.S. and Canada declined 1% to $750.6 million.

Hasbro is launching retail sales of toys tied to the Solo: A Star Wars Story in April, a month ahead of the film’s release, Goldner said.

“Star Wars is a large brand that may be more valuable five years from now than it was the past five years, including the 2015 film release, says Goldner. “But it will be a major contributor of revenue at a more normalized level.”

As a result of Star Wars-related sales falling short of Hasbro’s forecast, its revenue declined 4% to $1.59 billion in Q4. While Hasbro’s franchise revenue (led by Transformers, Nerf and My Little Pony and Monopoly) jumped 11% to $764.2 million, revenue from licensed brands fell 21% to $342.9. In addition to the lower-than-forecast Star Wars sales, Hasbro also posted lower sales of Trolls, Frozen and Yo-Kai Watch products, a downturn that was offset by gains in Sesame Street, Beyblade and Marvel.

The company also was hit by Toys R Us’ bankruptcy last fall and the company expects “headwinds early this year as we right-size the business” with TRU, Chief Financial Officer Deborah Thomas said. TRU is “streamlining” inventory as it moves to close 175 stores, including 48 toy specialty locations, Goldner said.

“We have built a plan for the right size of our Toys R Us business and we continue to manage our risk,” Goldner said, adding that Hasbro is expanding distribution to value and drug chains to help offset any revenue lost from Toys R Us.

Overall, Hasbro swung to a $5.2 million net loss from a $180.5 million profit a year earlier as it took a $296 million charge tied to the new federal tax reform act. Operating profit in its Entertainment and Licensing category rose sharply to $56.8 million as revenue increased 7% to $122.9 million. Hasbro’s royalty costs decreased 9.6% to $122.7 million on lower sales of licensed products.

Contact:

Hasbro, Deborah Thomas, Chief Financial Officer, 401-431-8697, deborah.thomas@hasbro.com.