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Q2-2015: Forex pulls down Hasbro revenue; Licensing & Entertainment op income halves

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BENGALURU: American multinational toy and board game company Hasbro, Inc., (Hasbro) reported 3.8 per cent decline in net revenue to $797.66 million in the quarter ended 28 June, 2015 (kQ2-2015) as compared to the $829.26 million in the corresponding year ago quarter  (quarter ended 29 June, 2014) impacted by negative forex of  $71.5 million says the company. If the forex loss was neglected, net revenue in Q2-2015 grew 4.8 per cent in the current quarter as compared to the previous quarter. 

For the six month period ended 28 June, 2015 (6M-2015), Hasbro reported almost flat revenue(0.2 percent higher) at $1511.16 million as compared to the $1508.72 million in 6M-2014 (six months ended 29 June, 2014).

Hasbro’s Licensing and Entertainment segment contributes around six per cent to Hasbro’s revenue. The segment reported almost flat revenue in Q2-2015 $47.64 million as compared to the $47.66 million in the corresponding year ago quarter. However, its operating income halved (declined by 49 per cent) to $7.44 million in Q2-2015 as compared to the $14.65 million in Q2-2014, primarily due to digital gaming expenses, including the final quarter of amortization expense from certain digital gaming rights says the company.

Company speak

Net earnings attributable Hasbro increased 22.7 per cent to $41.81 million (5.2 per cent of net revenue) in Q1-2016 as compared to the $33.48 million (four per cent of net revenue in Q2-2014).

"Our second quarter results continue a strong start to the year with good underlying momentum in our Franchise and Partner brands across geographies," said Hasbro chairman, president and CEO Brian Goldner. "The execution of our brand blueprint strategy, including our recent decision to sell our final manufacturing locations and the continued development of new relationships in content development, furthers the transformation of Hasbro into an organization focused on global brand building. We are well positioned for the remainder of 2015, but importantly we continue to develop our capabilities for the long-term execution of our strategy toward unlocking the full potential value of our brands."

"Our second quarter results came with numerous challenges, including a significant negative foreign exchange impact and difficult year-over-year comparisons in several brands," said Hasbro CFO Deborah Thomas. "Even with these challenges, we delivered a strong second quarter and a good first half of 2015. We continue to make important investments across our business to promote brand initiatives and to further improve the global efficiency of Hasbro. Some of these investments will be more prominent in the second half of 2015 than they were in the first six months of the year."

Segment Revenue

Licensing and Entertainment segment

Hasbro’s Licensing and Entertainment segment numbers have been mentioned above.

US and Canada segment

Hasbro’s US and Canada segment net revenues increased one per cent to $385.2 million compared to $383 million in Q2-2014. The segment's results reflect growth in the Boys and Preschool categories says Hasbro. The US and Canada segment reported operating profit of $47.1 million, essentially flat with $46.9 million in Q2-2014.

International segment

International Segment net revenues were $362.8 million compared to $396.8 million in 2014. Growth in the Preschool category was more than offset by declines in the Boys, Games and Girls categories. On a regional basis, growth in Latin America was offset by declines in Europe and Asia Pacific. Emerging markets revenues declined 11 per cent in the quarter. Excluding an unfavourable $69.5 million impact of foreign exchange, of which approximately two-thirds of the impact was in Europe and the remainder in Latin America, net revenues in the International Segment grew nine per cent and approximately nine per cent in emerging markets.

The International Segment reported operating profit of $25.4 million compared to  the $29.2 million in 2014, which was also negatively impacted by foreign exchange.

Category Performance

Boys category

Q2- 2015 net revenues in the Boys category increased one per cent to $340.4 million. This growth was driven by year-over-year revenue gains in Hasbro franchise brand Nerf, as well as shipments in support of Jurassic World and growth in Marvel and Star Wars products. These increases more than offset the anticipated decline in Transformers, which faced difficult comparisons versus the 2014 shipments in support of the theatrical release of Transformers: Age of Extinction.

Games category

Games category revenues declined six per cent in the quarter to $211.6 million. Magic: The Gathering declined in the quarter as the major set release occurred in the first quarter 2015 versus the second quarter 2014. 

Over the first six months of the year, Magic: The Gathering revenues increased. Additional revenue declines in Duel Masters and Angry Birds products were partially offset by gains in franchise brand Monopoly as well as in several other games brands including Trouble, Clue and Twister.

Girls category

The Girls category revenues declined 22 per cent in the second quarter 2015 to $127.5 million. Furby was the leading driver of this decline, along with smaller declines in Franchise Brands My Little Pony and Nerf Rebelle in the quarter. Growth in Play-Doh Dohvinci and shipments of Disney Descendants partially offset these declines.

Preschool category

Preschool category revenues increased 14 per cent in the second quarter 2015 to $118.1 million. Growth in Franchise Brand Playdoh and shipments of Jurassic World more than offset revenue declines in core Playskool products.

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