Hasbro (HAS) posted weaker-than-expected first quarter earnings Tuesday but noted that higher toy prices and solid demand will deliver better profits by the end of the year as it looks to see-off pressure from activists investors.
Hasbro said adjusted profits for the three months ending in March were pegged at 57 cents per share, down 43% from the same period last year and 4 cents shy of the Street consensus forecast of 61 cents. Group revenues, Hasbro said, rose 4% to $1.16 billion, topping analysts' estimates of a $1.51 billion tally, thanks to a solid jump in sales from its partner-brand and television businesses.
The Monopoly and Play-Dough maker had cautioned in February that input costs and freight rate hikes would extend through most of the year, adding it will likely increase toy prices as a result.
Looking into the current year, Hasbro confirmed its sees 'low single-digit' revenue growth despite the strength of the U.S. dollar and an estimated $100 million impact from Russia's war on Ukraine, with operating cash flow in the region of $700 million to $800 million.
"The Hasbro teams executed well in the first quarter, growing revenue across segments and positioning us to increase our profit outlook for the year," said new CEO Chris Cocks. "Based on our current plans, we now believe mid-single digit adjusted operating profit growth and a 16% adjusted operating profit margin is achievable on revenue growth of low-single digits."
"As I assumed the role of Hasbro CEO on February 25, we began a thorough review of our business with a theme of focus and scale," he added. "We are leaning into our strengths and greatest growth opportunities, including in gaming, multi-generational brands and direct to consumer."
Hasbro shares were marked 0.75% higher in early Tuesday trading immediately following the earnings release to change hands at $84.40 each.
Activist investors Alta Fox Capital Management, which holds a 2.5% stake in the $11.8 billion company, have cited Hasbro's muted outlook, particularly when compared to that of its main rival Mattel (MAT), in its push for major changes at the toymaker following the loss of a lucrative licensing contract with Walt Disney DIS.
Alta Fox says it sees a path to Hasbro shares rising to $200 each -- nearly double its current levels -- if the group puts a new strategy in place and separates its profitable 'Wizards of the Coast' gaming operation.
