NEW YORK (CNNfn) - Hasbro Inc. said Thursday that third-quarter earnings will fall short of Wall Street forecasts due to sluggish sales of Pokemon and Star Wars products, and that it would cut up to 550 jobs, or about 5 percent of its work force, in a bid to cut costs.|
The nation's No. 2 toy maker said it expects to report earnings of 6 to 10 cents a share for the quarter, before charges, significantly below the 32-cent-a-share average from analysts polled by First Call, which tracks Wall Street forecasts. For the full year, the company expects to earn between 40 and 50 cents per share, compared with the Street's forecast of $1.04 a share.
The news sent Hasbro's shares tumbling $1.75 to $9.88 in trading Thursday. Earlier in the day the stock hit a new 52-week low of $9.63.
During a conference call with analysts Thursday, Hasbro executives said the sales shortfall could amount to quite a bit more than $100 million, and that they would probably cut some licensing agreements in a bid to reduce reliance on them for earnings growth.
"We're probably looking at a several hundred million drop in revenue for the full year, some of which will take place in the third quarter, some in the fourth quarter," Verrecchia said.
Verrecchia also said Hasbro would continue to take a hard look at all its licensing arrangements. "We want to make sure that any license we continue with, or access in the future, that we mitigate some of the risk factors that have been there and there could be some licenses that we do cancel."
The company wants to strike a "better balance" with licenses, Chairman Alan Hassenfeld told the analysts. "We want to make sure we are in a position Hasbro so that our success will not depend on the success of a blockbuster movie."
Pawtucket, R.I.-based Hasbro, which also makes G.I. Joe and Monopoly, plans to cut 500-to-550 jobs, or about 5 percent of its work force worldwide. The company plans to take a pretax charge of $70 million for severance payments and other factors, most of that in the fourth quarter.
The company also plans to reassess its 2001 product line, which could result in pretax charges of up $100 million, it said, adding it the restructuring is expected to begin generating savings in 2001.
Hasbro (HAS: Research, Estimates) also cited continuing weakness in the interactive entertainment business, an ongoing shortage of electronic components, the strong U.S. dollar, and other external factors for its shortfall. The company said it was considering strategic alternatives for the Interactive unit, which means a possible sale of the division, sources said.
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Company spokesman Wayne Charness declined to comment on the possible sale of the division, but said it was being considered along with several other strategic options to reduce costs, improve profitability and leverage its core brands.
Hasbro Interactive produces such popular computer games as X-Com Alliance, Roller Coaster Tycoon, Monopoly Tycoon, NASCAR Heat, and arcade classics Frogger, Pac Man, and Galaga.
Dean Gianoukos, an analyst with J.P. Morgan, said the toy business has traditionally been tough as children's tastes change so frequently, but that he liked Hasbro as a company, adding that the company is doing what it can to bring earnings up.
Earnings before interest, taxes, depreciation and amortization for the full year are expected to be approximately $540 million-to-$575 million, or $3.05-to-$3.25 a share.