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RetailToys R Us

Hasbro Says Toys ‘R’ Us Bankruptcy Will Hit Holiday Season Sales

Phil Wahba
By
Phil Wahba
Phil Wahba
Senior Writer
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Phil Wahba
By
Phil Wahba
Phil Wahba
Senior Writer
Down Arrow Button Icon
October 23, 2017, 2:10 PM ET
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Hasbro (HAS) said on Monday that uncertainty caused by the recent Toys ‘R’ Us bankruptcy would likely take a bite out of its holiday season sales, sending the toymaker’s shares sharply down.

The company, which makes products such as My Little Pony and Monopoly, gets about 9% of its sales from Toys ‘R’ Us, second in importance to the toymaker after Walmart (WMT). Hasbro said it remained unsure how frequently it will be able to ship items to the retailer during the holiday season, a time many chains such as Target (TGT) ring up about half of their annual toy sales.

Hasbro shares fell 9% on Monday morning on the news.

Toys ‘R’ Us’s bankruptcy filing came last month as some suppliers scaled back shipments amid the retailer’s efforts to reorganize about $400 million in debt coming due next year. Hasbro, one of Toys ‘R’ Us’s top creditors, along with rival Mattel (MAT), had pulled back on some shipments to the beleaguered rival last month amid the turmoil. Toys ‘R’ Us has lined up $3.1 billion in bankruptcy financing and said it will continue operating most of its 1,600 stores through the holiday season.

Hasbro CEO Brian Goldner, looking to soothe worried investors, said on a conference call that the bankruptcy filing of his customer “does introduce higher uncertainty as to the level of shipments to them in the fourth quarter.” Still, he said of Toys ‘R’ Us, “we are working with them as we enter the holiday period.” He also touted the wider availability of toys are different retailers now, such as drugstores and dollar stores, as well as online that he said mitigates its exposure to Toys ‘R’ Us. “The consumer continues to find our product,” he said.

Hasbro, the second biggest U.S. toymaker, expects fourth quarter revenue to increase 4% to 7%, or $1.70-$1.74 billion. Analysts on average had expected $1.82 billion, according to Reuters. Its third-quarter profit came to $265.6 million, or $2.09 per share, buoyed by 7% jump in revenue to $1.79 billion. Analysts on average had expected sales of $1.78 billion and a profit of $1.94 per share.

The company’s travails brought down those of rivals on Monday: shares of Mattel and Jakks Pacific slipped 4% and 1.5% respectively.

About the Author
Phil Wahba
By Phil WahbaSenior Writer
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Phil Wahba is a senior writer at Fortune primarily focused on leadership coverage, with a prior focus on retail.

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