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Second quarter 2018 revenues of $904.5 million;
U.S. and Canada segment revenues down 7%; International segment revenues down 11%; Entertainment and Licensing revenues up 26%;
Operating profit margin of 9.7%;
Reported net earnings of $60.3 million, or $0.48 per diluted share;
Strengthened brand portfolio with acquisition of Power Ranger;
Ended the quarter with $1.2 billion in cash and returned $152.8 million to shareholders; $78.7 million in dividends and $74.1 million in share repurchases.
Net revenues for the second quarter 2018 decreased $904.5 million versus $972.5 million in 2017. The lower revenues reflect the liquidation of Toys“R”Us in the U.S. and many other global markets. In addition, revenues declined internationally, most notably in Europe, as a result of managing retail inventory amid a rapidly evolving retail landscape. Net earnings for the second quarter 2018 were $60.3 million compared to $67.7 million for the second quarter of 2017.
“2018 is unfolding as expected as our teams manage the liquidation of Toys“R”Us in many markets and address the rapidly evolving European retail landscape,” said Brian Goldner , Hasbro’s chairman and chief executive officer. “We are investing in our business - in innovation, entertainment and a modern global commercial organization, to drive profitable growth in 2019 and beyond. Consumer takeaway is up for our brands, and we further strengthened our brand portfolio through the acquisition of Power Rangers. We are focused on moving beyond the near-term disruption of losing a major customer, with a clear path forward including new retailer activations to meet the consumer demand made available by the Toys“R”Us departure.”
“Our global teams executed well despite the disruption in the market,” said Deborah Thomas, Hasbro’s chief financial officer. “With $1.2 billion in cash, and a healthy balance sheet, our financial position is strong. Our diverse portfolio enabled us to partially offset the negative margin impact from lower revenues, but not entirely. We are working with our retailers to successfully execute their plans for Hasbro’s innovative portfolio this holiday season.”
Second quarter 2018 U.S. and Canada segment net revenues decreased 7% to $459.3 million compared to $494.4 million in 2017. The segment reported an operating profit of $76.2 million, or 16.6% of net revenues, compared to an operating profit of $81.6 million, or 16.5% of net revenues, in 2017. The segment’s quarterly performance was negatively impacted by the loss of Toys“R”Us revenues and the near-term disruption of its stores’ liquidation in the marketplace. Favorable product mix helped offset the negative impact of lower revenues on operating profit margin.
Second quarter 2018 International segment net revenues were $380.4 million, down 11%, compared to $426.6 million in 2017. Revenues in the segment were negatively impacted by efforts to clear excess retail inventory in Europe, as well as the loss of Toys“R”Us revenues in many Europe and Asia Pacific markets. International segment revenues include a favorable $2.6 million impact of foreign exchange. On a regional basis, Europe net revenues decreased 16%, Latin America decreased 3% and Asia Pacific decreased 5%. Emerging markets net revenues decreased 9% in the quarter. The International segment reported an operating profit of $0.2 million compared to an operating profit of $16.9 million in 2017. The decline in operating profit reflects lower revenues combined with fixed cost deleveraging.
Entertainment and Licensing segment net revenues increased 26% to $64.7 million compared to $51.5 million in 2017. Operating profit increased 64% to $18.6 million, or 28.8% of net revenues, compared to $11.3 million, or 22.0% of net revenues, in 2017. The adoption of ASC 606 Revenue from Contracts with Customers favorably impacted the timing of revenue recognition in the quarter, in addition to the continued underlying success in our licensing and entertainment businesses.
Hasbro’s total gaming category, including all gaming revenue, most notably Magic: The Gathering and Monopoly, which are included in Franchise Brands totaled $312.8 million for the second quarter 2018, up 14%, versus $273.3 million in the second quarter 2017. This category was down 2% to $516.3 million for the six months 2018 versus $526.6 million for the six months 2017. Hasbro believes its gaming portfolio is a competitive differentiator and views it in its entirety.
Second quarter 2018 revenues were negatively impacted by the liquidation of Toys“R”Us in the U.S. and many other global markets, including lower Toys“R”Us revenues and the near-term disruption of its stores’ liquidation in the marketplace, as well as managing retail inventory, primarily in Europe.
Second quarter 2018 Franchise Brand revenues decreased 8% to $506.5 million. Growth in Magic: The Gathering, Monopoly and Baby alive were offset by declines in the other Franchise Brands in the quarter, including Transformers which declined versus the movie launch in the second quarter 2017. Franchise Brand revenues grew in the Entertainment and Licensing segment and declined in the U.S. and Canada and International segments.
Partner Brand revenues declined 10% to $208.0 million. Revenue growth in Beyblade and Marvel was more than offset by declines in other Partner Brands. Partner Brand revenues decreased in the U.S. and Canada and International segments.
Hasbro Gaming revenue increased slightly to $134.3 million. Revenue gains in Dungeons and Dragons, Duel Master, Jenga and Don’t step in it were partially offset by declines in other properties. Hasbro Gaming revenues increased in the International segment and the Entertainment and Licensing segment; but declined in the U.S. and Canada segment. Hasbro’s total gaming category was up 14% to $312.8 million, including growth in Magic: The Gathering and Monopoly.
Emerging Brand revenue declined 1% to $55.6 million. The category benefited from several new initiatives, including Lost Kitties and Lock Stars. This was offset by declines in other Emerging Brands. Emerging Brands revenues grew in the International segment and declined in the U.S. and Canada segment and the Entertainment and Licensing segment.