Leading toy and game maker Hasbro (HAS 99.79, +5.86, +6.2%) reported its fiscal fourth quarter results before the open. They can be deemed a mixed bag in that sales growth was missing, but adjusted earnings per share growth was not.
For the period ended December 31, net revenues decreased 2.1% to $1.6 billion, falling shy of the company's expectations due to a decline in Partner Brands and Europe revenues. Hasbro stated as well that overall consumer demand slowed in November and December for the company and the industry.
The company and the industry was also dealing with the Toys 'R Us bankruptcy filing. In 2016 Toys 'R Us accounted for 9% of Hasbro's net revenues.
The sales downturn in the fourth quarter would have been more pronounced if not for the strength in the core Franchise Brands segment, which enjoyed an 11% increase in net revenue of $764.2 million on the back of strength in the gaming category.
The disappointment in the quarter was the Partner Brands segment, which registered a 21% decline in net revenue of $342.9 million, led mostly by a revenue decline in STAR WARS products. Hasbro Gaming net revenues declined 4% to $343.3 million and net revenues for the Emerging Brands segment decreased 5% to $145.7 million.
Notwithstanding the overall decrease in net revenues, Hasbro's adjusted net earnings, which exclude the impact of tax reform and goodwill impairment, surged 40% to $2.30 per diluted share, easily surpassing analysts' average expectation.
That bottom-line growth was helped along by a decline in Selling, Distribution and Administration expenses as a percentage of net sales and a lower share count. Hasbro's operating margin for the fourth quarter increased 130 basis points to 17.0%.
For the full year 2017, Hasbro reported a 4% increase in net revenues of $5.21 billion and an adjusted net profit of $5.46 per diluted share, which excludes the impact of U.S. tax reform, up 22% from 2016 on a comparable basis.
Shares of HAS saw a knee-jerk sell-off to the report in pre-market trading, yet the stock, like the broader market, has rebounded sharply during regular trading hours.
Including today's gain, HAS is up 9.8% year-to-date, leaving it well ahead of the S&P 500 (+1.7%) but trailing its biggest industry competitor, Mattel (MAT 17.14, +0.29, +1.7%), which is up 11.4%. On a related note, it has been speculated in the past that Hasbro might be interested in acquiring Mattel.