Hasbro (HAS) shares fell 9.44 percent after the company posted sales figures that beat profit forecasts by the smallest amount.
According to Bloomberg data, the decline is their worse since October 2015.
Despite the decline, the toymaker closed at $105, which is still a gain of 35 percent for the year. Second-quarter revenue came it at $972.5 million compared to $878.9 in the previous year. Adjusted earnings per share also exceeded expectations, with 53 cents per share against estimates of 46 cents. Revenue for the U.S. and Canada were up $494.4 million versus $425.9 in the previous year.
The company, which is U.S.’s No.2 toymaker, reported that quarterly sales of its Playskool, Easy-Bake and Super Soaker brands did not reach expectations. Sales for these “emerging brands” dropped 14 percent to $62.9 million. Sales for the company’s partner brands, including Star Wars and Marvel products, were also mediocre, up by only 1 percent to $230.0 million, but had been down 9 percent to $443.0 million for the first half of the year. Entertainment and licensing also dipped 1 percent to $51.5 million compared to last year’s $51.9 million.
The company said that revenues also took a huge hit from challenging retail markets in Brazil and the UK.
Reported revenues may have underwhelmed traders’ high expectations, which drove the company’s shares higher by nearly 50 percent since the end of 2016, making it a top performer on the S&P 500 index.
“The stock was very strong heading into the quarterly report, so it sets the bar very high,” Linda Weiser, analyst at D.A. Davidson, said.
Weiser added that Hasbro’s high valuation compared to other companies, together with management comments about the shift to fourth quarter sales, may have weighed on the shares. Shares were already down 6 percent in pre-market trading Monday.
Hasbro’s unexceptional revenues dampened what was hoped to be a promising quarter for the company, with revenue for franchise brands Transformers, Nerf and Monopoly coming up a stellar 21 percent to $545.7 million.
The franchise brands were boosted by the release of the movie “Transformers: The Last Knight” on June 21, which led to the revenue gain. According to Jaime Katz, analyst at Morningstar, the franchise brand segment’s performance was impressive, as the said “Transformers” movie only grossed $128 million in the U.S., which is not even half of the $245 million-worth of domestic receipts for the 2014 release of the franchise.
According to New York Post, the company released Autobots and Decepticons merchandise and toys based on the film in February, in anticipation of the movie’s June release.
Hasbro execs say that the figures only reflect the timing of the releases. For instance, the second half of 2017 have more potential hits scheduled compared to 2016 release schedules. The company also discounted products ahead of the releases, such as the Star Wars merchandise and the Frozen franchise ahead of the release of “Olaf’s Frozen Adventure” in November.
According to Hasbro CFO Deb Thomas, some sales booked during the second quarter will usually not materialize until the end of the year.
“Given the timing of entertainment this year, the rapid growth of e-commerce and our global retailers’ focus on just-in-time inventory, our expectation for quarterly revenue is a shift to later in the year,” Thomas said in an earnings call.
Many analysts also believe that the sell-off was a little “overdone,” Fortune reports. The “Star Wars: The Last Jedi” movie may help push results up for Hasbro in the second half of 2017. The company is taking advantage of the potential blockbuster by holding close-out sales, Thomas said.
“We entered the important second half of the year with strong consumer momentum, a robust and diverse entertainment slate and compelling new brand initiative,” CEO Brian Goldner of Hasbro said in an earnings statement. “We are well positioned with innovative new product driven by strong entertainment as we enter the second half of the year.”