US economy

Hasbro tumbles as tariff ‘ripple effect’ drags on toy maker


Hasbro shares were eyeing their biggest sell-off in more than 18 years, after the toy maker said the threat of more tariffs caused retailers to cancel or change orders during the third quarter.

Like other companies manufacturing goods in China, Hasbro has been caught in the crossfire of the trade battle between Beijing and the US. Some of the group’s games were hit by tariffs enacted in September, leading Hasbro to increase pricing to offset their impact on margins.

The prospect of a new round of tariffs on a range of consumer goods also dragged on Hasbro’s quarterly earnings, which widely missed estimates. In anticipation of the “List 4” tariffs, set to take effect in December, retailers cancelled direct import orders and switched many of those orders to domestic shipments, according to Hasbro. It incurred additional shipping and warehousing expenses as it scrambled to move inventory to the US and keep retailers’ shelves stocked.

Hasbro said it was unable to ship all of the orders by the end of the quarter.

Brian Goldner, chief executive, said on an earnings call Hasbro prioritised key toy launches, including new Star Wars and Frozen products. “We’re working to catch up in the first weeks of the fourth quarter and while early, we are seeing strong consumer demand for these new initiatives,” he added.

“We are working diligently to improve our approach to domestic shipments and still face the prospect of more direct import cancellations and shifts to domestic orders as the December 15 List 4 date approaches for most of our product lines.”

The tariffs, which were initially scheduled for September, were delayed by President Donald Trump amid concerns over potential disruptions during the holiday shopping season.

Shares in Hasbro dropped more than 15 per cent to $101.62, their lowest level since June. It marked their steepest one-day decline since December 2000.

Tariff troubles have hit Hasbro and other toy makers at a time when they have stepped up efforts to expand their presence in media, seeking to develop new films based on their toy franchises and increase sales.

Hasbro announced in August it reached a deal to acquire Entertainment One, the company behind the Peppa Pig cartoon, for about $4bn. Entertainment One’s shareholders approved the transaction last week, and the deal is expected to close in the fourth quarter.

In the third period, Hasbro took a $20.9m after-tax charge, or 16 cents a share, due to foreign currency hedging related to the deal.

Hasbro booked net earnings of $212.9m, or $1.67 a share, down from $263.9m, or $2.06 a share, in the year-ago quarter. Adjusted per-share earnings were $1.84, below analysts’ average estimate of $2.21.

Net revenue rose to $1.58bn from $1.57bn. Analysts were looking for $1.72bn.



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