The ongoing Toys ‘R’ Us bankruptcy earthquake continues to shake toymakers hard.
Hasbro, (HAS) the maker of products like Transformers and My Little Pony, on Monday reported a 16% first quarter drop in its revenues to $716.3 million and warned investors it will keep feeling the aftershocks of Toys ‘R’ Us’ ongoing liquidation through the year, though to a lessening degree as the holiday season approaches.
At the same time, Hasbro fleshed out more of its plan to replace sales that have evaporated with the Toys ‘R’ Us demise, one that entails much more online selling and deeper partnerships with general merchandise retailers Target (TGT)and Walmart (WMT).
Toys ‘R’ Us, which filed for U.S. bankruptcy protection in September hit by an enormous debt load and slowness to shift online, is currently winding down its stores, hitting sales, and lowering prices for toymakers. Its U.K. stores are also liquidating. Hasbro has decided to speed up a previously announced plan to shift more of its business online, and has replaced many executives with newer people more deeply knowledgable about e-commerce. Hasbro already makes about one-fifth of its sales online and wants to ramp that up.
“We’re working aggressively around the world to put the impact of Toys ‘R’ Us behind us,” Hasbro CEO Brian Goldner told Wall Street analysts on a conference call. And the opportunity for other retailers, namely Target and Walmart, to pick up Toys ‘R’ business “is present.” He added: “We are just building those plans to do that, but it takes some time.”
He also pointed to online retailers like Amazon.com, Alibaba and Tmall as others that can pick up some of that business, something Jefferies toy analyst Stephanie Wissink said in a research note shows that “The balance of power in toy retail is shifting toward Amazon and the dot-coms.”
Hasbro’s arch-rival Mattel (MAT) has been facing drama of its own, last week announcing that Margo Georgiadis would leave the company after barely more than a year in the top job, and be replaced by Ynon Kreiz, a Mattel director. The drama buffeting the toy-making giants comes amid slowing growth as kids increasingly turn to electronics rather than toys.