Hasbro earnings battered by boys' toys

The toymaker slides 3.6% as Transformers tank and technology takes a toll.

By Jason Notte Oct 22, 2012 1:27PM

Pitting girls against boys didn't pay off for Hasbro (HAS), especially when those boys' toys got old and boring.

Kids who didn't want to play with Transformers or buy Beyblade gear nearly a decade after its anime heyday pushed down Hasbro's earnings 3.6% to $164.9 million in the third quarter. 

The toymaker notes that while Twister, Magic: The Gathering, and Battleship products did well, the Transformers and Beyblade portions of their "boys" category dragged down that segment's revenue by 12% to $471 million of Hasbro's $1.35 billion revenue total.

The same boys also didn't want to see movies about board games. While the company's ties to "The Avengers" led to great sales for its Marvel-based products, its co-producer credit on this summer's movie adaptation of the game Battleship was a miss. By making less than $70 million in the U.S. on a budget of nearly $210 million, "Battleship" bombed at the box office and sank Hasbro's entertainment and licensing revenue by 7% to $43.1 million.

Meanwhile, presidential debates aren't the only place where Big Bird is finding his yellow plumage under fire lately. Decreased sales of Sesame Street products deflated Hasbro's preschool toy sales by 5% to $206 million last quarter despite growing demand for squishy Play-Doh and sturdy Playskool Heroes sets.

This is not the kind of news a toymaker likes to hear heading into the holiday season, which can bring in roughly 40% of the company's earnings for the year. It's already an extraordinarily tough time for Hasbro, which cites a slumping economy for many of its woes but is facing a tougher challenge from technology. When kids can play games on their Facebook pages and build whole worlds on their Apple (AAPL) iPads, it's much harder to get them to sit down to a board game or race Hot Wheels cars on their parents' hardwood floors.

Hasbro has been trying to address those challenges, with mixed results. Monopoly boards and Hot Wheels cars that interact with the iPad and iPhone fit into the augmented reality those devices promise. But Angry Birds and Zynga FarmVille board games? If Hasbro wants to know why sales of its games are as flat as the boards they're played on, ask Newsweek what demand is like for real-world versions of items that work just fine in online and mobile form.

Antonio M. Rosario, Tetra images, Getty ImagesBesides, toys tend to sell themselves when you hit on an idea kids love. Last week, Mattel (MAT) reported a 22% third-quarter earnings uptick, thanks to strong sales of Monster High dolls, Fisher Price toys and American Girl items. Hasbro already knows why the latter succeeds, as sales of Hasbro's "girls" products jumped 17% to $302 during the past three months. A new version of Furby, a tie-in with the boy band One Direction, cartoon-supported old favorite My Little Pony and perennially beloved Easy-Bake ovens were all incredibly popular for Hasbro during the third quarter and may guide the company through the months ahead.

Girls products fueled a 1% revenue increase in the U.S. and Canada and are already a big portion of the holiday push. Hasbro is planning to roll out new Baby Alive and Furreal Friends toys for the season and is leashing its fortunes to the collar of Bouncy, My Happy To See Me Pup.

With no Tranformers movie in sight and the imagination-deprived boys market increasingly abandoning toys for touchscreens, Hasbro may want to listen to the advice Cyndi Lauper offered decades ago. Obey the market and give girls the fun they just wanna have.

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