Hasbro Still Feels Sting From Loss of Toys 'R' Us Business - Wall Street Journal

This post was originally published on link to post

This article was originally published on this site

Hasbro, which is behind My Little Pony, is confronting a new retail landscape with the demise of Toys “R” Us.


Photo:

Daniel Acker/Bloomberg News

Hasbro
Inc.


HAS -3.92%

continued to struggle in the aftermath of Toys “R” Us’s demise, as liquidation sales damped demand for orders and finding new places for the lost business created complications.

The maker of Monopoly games and Nerf blasters posted a 12% drop in third-quarter sales, citing the loss of Toys “R” Us business and related ripple effects.

Among the challenges are finding outlets to sell toys. Retailers like

Target
Corp.

and

Walmart
Inc.

are expanding floor space devoted to selling toys for the coming holiday season, and other new chains like Party City’s temporary Toy City are vying for the former Toys “R” Us business. More smaller, independent toy shops are carrying more mainstream products.

But this new retail landscape has a drawback. Instead of shipping massive amounts of toys to Toys “R” Us, Hasbro says the broader footprint means it has to ship smaller quantities to more locations. While Toys “R” Us stocked its warehouses and backrooms deep with inventory well ahead of Christmas, the new retailers want the toys closer to the holidays.

The retail industry is undergoing another major shift — to e-commerce. How did we get here? Photo: Associated Press

“We’re working with a greater variety of retailers that have differentiated shipping requirements,” Hasbro Chief Executive Brian Goldner said Monday on an earnings call. He added that Hasbro is trying to get retailers to commit to carrying more toys.

Hasbro, with headquarters in Pawtucket, R.I., said it wasn’t able to ship out all the orders that came in during the third quarter, with about $50 million in toys shipped in the first week of October. It plans to build a new warehouse in the Midwestern U.S. next year to cut down delivery times and distances and help better meet demand.

Hasbro is also planning a global restructuring as it adapts to the new environment, which includes more toy sales moving online. That’s causing a big disruption to order flows as well, since internet sellers tend to buy smaller quantities and less frequently than stores. Hasbro is laying off as much as 10% of its global workforce of 5,400, which will yield up to $60 million in restructuring charges and $40 million in annual savings.

Total revenue fell about 7% in the U.S. and Canada, where Hasbro said it was able to recapture about a third of the lost Toys “R” Us business. Declines were steeper overseas, where revenue dropped 24%, led by a big drop in Europe where retailers continue to sell their existing Hasbro inventory.

Overall for the period, Hasbro’s earnings fell 0.6% to $263.9 million, or $2.06 a share. On an adjusted basis, earnings fell to $1.93 a share from $2.09.

Mr. Goldner said that the disruption stemming from Toys “R” Us’s demise is expected to last for a few more quarters.

In early trading, Hasbro shares fell 5.5% to $92.66. Shares of

Mattel
Inc.,

which reports earnings Thursday, fell 1.6% to $14.

Write to Paul Ziobro at Paul.Ziobro@wsj.com