Hasbro on Wednesday reported a surprising decline in quarterly sales amid weak demand for its “Star Wars” and “Frozen” toys, raising questions about its strategy of tying products to Hollywood films.
For the fourth quarter, the toymaker posted adjusted earnings of $2.30 per share, easily beating analysts’ estimates of $1.80. But revenue fell nearly 2% from a year ago to $1.60 billion in the three months to the end of December.
Analysts had expected revenue of $1.72 billion and Hasbro had guided for growth of between 4% and 7%.
Most notably, revenue from Hasbro’s partner brands segment, which includes “Star Wars,” “Frozen” and “Marvel” merchandise, slumped 21% in the fourth quarter to $342.9 million. “An increase in Beyblade, Marvel and Sesame Street revenues was more than offset by a revenue decline in Star Wars and to a lesser extent declines in Yo-Kai Watch and Disney Frozen,” the company said in a news release.
“Partner brand revenues decreased in the U.S. and Canada and International segments,” it added.
Under CEO Brian Goldner, Hasbro has evolved from a traditional toy company to a global entertainment and licensing powerhouse, giving it an edge over rival Mattel. Its $5.2 billion in sales in 2017 were ahead of Mattel’s $4.9 billion.
But according to The Financial Times, Hasbro’s “latest results raise some questions about how much it can rely on [the Hollywood tie-up] strategy.”
The company said it doesn’t see the fall in sales as “Star Wars fatigue,” citing the long gap between the release of “Star Wars: The Last Jedi” and Force Friday, the day it launches Star Wars toys. Goldner noted that Hasbro was partnering with Disney to release toys closer to movie openings.
“Overall consumer demand slowed in November and December both for the industry and for Hasbro,” he said.
Hasbro’s fourth-quarter profit, meanwhile, was boosted as sales at the company’s high-margin entertainment and licensing segment, which licenses out Hasbro characters to movie studios, more than tripled to $56.8 million.
Entertainment and licensing “basically saved the quarter,” UBS analyst Arpine Kocharyan told Reuters.