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Hasbro Reports Slowing Growth In Boys Division

Slowdown, paired with an inventory buildup, sparks worries ahead of holiday season

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Weakness in Hasbro’s boys division was caused by a 20% drop in Transformers and another “significant” drop in Jurassic World toys. Photo: Associated Press

By

Paul Ziobro

Paul Ziobro
The Wall Street Journal
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Updated July 18, 2016 12:03 p.m. ET

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Hasbro Inc. reported a sharp slowdown in sales growth for its boys toys and a large inventory buildup in the second quarter, stoking concerns about the toy maker as it nears the critical holiday season.
Hasbro’s overall sales rose 10% in the period, led by a trio of toy brands licensed from Walt Disney DIS -0.68 % Co: Star Wars, Frozen and Disney princesses.
But sales in its boys division rose just 4% in the period after posting a 24% gain in the first quarter. The weakness was caused by a 20% drop in Transformers and another “significant” drop in Jurassic World toys, which the company says will continue to weigh on results this year. Chief Executive Brian Goldner added that Hasbro will lose the Jurassic Park license at the end of 2017 because Hasbro couldn’t agree on renewal terms with the franchise’s owner, Universal Studios.
In recent trading, Hasbro shares fell 7.3% to $79.26, though year-to-date, are still up 18%.
The toy industry has experienced a resurgence lately, easing concerns that playing with traditional toys had ceded ground to children tapping away at smartphones and tablets. Toy sales rose 6.7% in the U.S. last year, the best results in more than a decade, according to research firm NPD Group Inc.

Rival Mattel Inc. MAT -0.80 % reports its second-quarter financial results struggled recently, Mattel has taken some steps to bolster its operations. In April, Mattel reported its loss widened as Barbie sales fell and it was unable to make up for the loss of the Disney license to Hasbro.
The weaker results from Hasbro’s boys division, its largest, overshadowed a surge in its girls business, where sales rose 35%. That was mainly driven by the addition of the Frozen and Princess Disney licenses, which Hasbro won from Mattel in 2014 and started selling earlier this year. Both have done better than expected so far, Mr. Goldner said.
Those new additions to Hasbro’s business, as well as items like Yo-Kai Watch, have caused Hasbro to build up its inventory heading into the holidays. Hasbro’s inventory rose 42% versus a year ago, when Hasbro had to build up its toy stocks ahead of the launch of the seventh installment of the Star Wars series.

Mr. Goldner said that 80% of the inventory increase came from new and fast-selling toys, including Play-Doh, and that the company is “well-positioned” on inventory heading into the holidays. “We have great momentum in our business,” Mr. Goldner said. “Our retailers have clearly made plans that involve many of our brands.”
In all, Hasbro posted a profit of $52.1 million, up from $41.8 million a year prior. Revenue increased 10% to $878.9 million. Excluding headwinds from foreign exchange, the company said revenue rose 12% in the period.

—Joshua Jamerson contributed to this article

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