Hasbro cutting 2,200 jobs
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December 7, 1999: 1:12 p.m. ET
Toy maker eliminating one-fifth of work force, sets $141M charge in 4Q
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NEW YORK (CNNfn) - Hasbro Inc., the nation’s second-largest toy maker, is cutting roughly 2,200 jobs, or about one-fifth of its work force, as it copes with vast changes in kids’ playtime appetites.
Pawtucket, R.I.-based Hasbro, the maker of the hot-selling Furby talking doll and a vendor of toys related to Pokemon, also will take a fourth-quarter charge of $141 million to pay for the restructuring.
The bulk of the job cuts, about 1,850, are in manufacturing positions in Tijuana, Mexico, and Ashford, England. Hasbro will make up for the lost production at its other facilities and in Asia.
"Positioning for continued growth and profitability improvement means we must continue to do more with less,” said Herbert M. Baum, president and chief operating officer.
Hasbro (HAS) said the reorganization should generate pretax savings of roughly $16 million in 2000 and $23 million a year after that.
Hasbro said it’s comfortable with the analysts’ forecast for fourth-quarter earnings before the charge. Analysts polled by First Call were looking for 76 cents per diluted share in the quarter, up from 65 cents per share a year ago.
In New York Stock Exchange trading, Hasbro shares fell 1-5/16 to 20-1/8 at around 12:30 p.m. ET Tuesday.
‘Toys aren’t toys anymore’
The restructuring, which begins immediately and is expected to run into fiscal 2000, comes amid a sea change in the industry, away from traditional games and toys in favor of electronic games.
"Toys aren’t toys anymore ... and kid’s aren’t the same anymore,” Sean McGowan, an analyst with Gerard Klauer Mattison & Co, said. "They are putting down toys and picking up joysticks for PC-related games.”
The moves announced Tuesday will accelerate Hasbro’s effort to meet that industry change. The company has moved into the number three position among independent publishers of entertainment software, McGowan said, from nothing in that space about five years ago.
But Hasbro has run into glitches as it enters the information age. Plans to launch a Web-based clearinghouse for its interactive games have run into delays as it struggles to find an online partner.
Top rival Mattel (MAT) has run into problems in cyberspace as well, with the defection of its top executive at the mattel.com online unit last month.
McGowan, who has a "buy” rating on Hasbro shares, said the changes are part of the company’s "ongoing effort to cut costs” and may not be the last. While the timing was a surprise, he said, the announcement already was a part of his model on the company. "I was implicitly expecting that those cost-cutting measures would take place.”
McGowan said Hasbro has been outpacing industry benchmarks for volume growth for the first nine months of 1999. He said Furby sales are expected to be six-fold those of a year ago, at between $300 million and $350 million.
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