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NEW YORK – Toy giant Hasbro reported a 71 percent decline in its first-quarter profit on Thursday amid higher development costs for new products, a ramp-up in spending on its burgeoning TV production business and launch losses at new children’s TV network The Hub.
The firm also cited weaker demand for its games and puzzles and girls toy categories. Management, however, predicted improving financial momentum in the coming months thanks to toys tied to upcoming movies.
On a conference call, president and CEO Brian Goldner also said that The Hub, a joint venture with Discovery Communications, has decided to hit the pause button on animated series G.I. Joe: Renegades, based on Hasbro brand G.I. Joe, until a movie sequel comes out next year. Management said the plan is to adjust animation and storylines to put the TV show in sync with the film and resume it after the movie hits theaters.
Goldner on Thursday reiterated that his company has Battleship, a G.I. Joe sequel and a Ouija movie on its film slate for 2012, plus toys tied to a Star Wars 3D reissue, The Avengers and the latest Spider-Man film.
Asked what will come after that and if a rumored Hasbro Factory movie was in the works, he didn’t provide details beyond saying: “We have a number of brands in development for 2013 and beyond.” Monopoly and Clue are among the Hasbro games known to be in development.
This is the first year in Hasbro’s multi-year strategy for transforming its business into a broader entertainment operation that will see initiatives across TV, movies, digital gaming, licensing and games.
Despite a weaker first quarter, “the stage has been set for a strong year, and we continue to believe that we will grow revenues and earnings per share for the full-year 2011,” said Goldner.
“Importantly, we are building momentum leading up to the theatrical release of Transformers: Dark of the Moonon July 1 and two new Marvel films, Thor and Captain America: the First Avenger, this summer; multiple new innovative product launches; and the airing of Hasbro Studios television programs in territories around the world,” he said.
Toy shipments for the third Transformers film will increase in the coming weeks, and Goldner called the brand “a very robust line” and lauded strong global interest in toys tied to the movie. He said he was “very enthusiastic” about the Transformers and predicted a very strong year for it, but declined to provide specific guidance, including whether Transformers toy sales will be bigger than in 2009. Back then, the previous movie came out, and Hasbro generated $592 million in Transformers toy sales. “This movie will resonate,” Goldner predicted. “It’s a really fun movie.”
Thor product has also had initial shipments, and “so far it is selling well,” the Hasbro CEO said.
Hasbro said Thursday that its profit declined 71 percent to $17.2 million in the seasonally slow first quarter, compared with $58.9 million in the year-ago period. It said it recorded a loss from the Hub as it incurred launch support costs and booked more than $3.1 million in program production costs as it spent more on TV production.
Revenue was virtually flat at $672 million, but exceeded the average Wall Street estimate. Management said retailers in many cases cleared out excess inventory after the holiday season instead ordering new product.
Entertainment and licensing revenue declined 2 percent to $24.6 million amid lower licensing revenue from the previous Transformers movie.
Asked about the Hub, Goldner said it is on track with longer-term plans. It is, for example, continuing to add advertisers and has more than 100 now, he said. An international rollout of Hub shows will bring them to as many as 20 countries in Europe, Asia and Latin America this year. Plus, “we continue to make much progress” on ratings,” he said.
While some critics had feared the Hub would become more of an advertising tool for Hasbro toys than anything, Goldner said Thursday that the firm has only had product out for a My Little Pony show and has otherwise let the channel launch simply as an entertainment network. But he did say that there were signs from the company’s experience in Canada that the toy business can get a lift.
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