Hasbro Ready To Cash In On Toys Tied To Transformers Movie
The Wall Street Journal
July 8, 2009
Hasbro Inc. (HAS) is revving up for bigger sales in the toy aisle thanks to the blockbuster Transformers movie sequel, with merchandise sales topping the 2007 product lineup by as much as 25%, analysts say.
"Transformers: Revenge of the Fallen" is No. 1 at the box office so far this year. Since its June 24 release, the movie has racked up $607.6 million in global ticket sales through July 6, according to reporting service Box Office Mojo.
Industry analysts forecast that Transformers toy-related sales, including licensing fees, could be as high as $600 million by year's end. If sales hit that mark, this would be 25% above the $482 million in sales the first Transformers movie-toy line racked up two years ago.
Retailers started to sell merchandise for the second Transformers movie on May 30. The toys, celebrating their 25th anniversary, include robot action figures, helmets and lunch bags. "The toys are doing exceptionally well," said Lutz Muller, a toy-marketing analyst who runs Vermont-based Klosters Trading Corp.
In an emailed statement, Toys 'R' Us said the new Transformers "have surpassed sales of the toys based on the first Transformers movie." The major retailer helped support Hasbro's launch of the product line with print and Internet ads.
Shares of Hasbro traded flat at $23.04 in early afternoon trading Wednesday.
Analysts' estimates vary on Transformer product sales for this year. Drew Crum at Stifel Nicolaus expects Hasbro to generate $550 million in sales from the toy line this year, while Sterne Agee's Margaret Whitfield estimates Transformers toy sales can easily exceed $500 million.
Sean McGowan at Needham & Co. projects Hasbro will sell $595 million worth of new and old Transformers merchandise in 2009, or 14% of total company sales.
There is less competition among movie-themed toys on retailer shelves this year.
In 2008, kids had plenty to choose from, when Hasbro and Mattel Inc. (MAT) made numerous toys tied to action movies featuring Indiana Jones as well as comic-book characters Batman, Iron Man and the Hulk.
Gerrick Johnson, analyst at BMO Capital Markets, estimates Transformers sales could provide a lift to Hasbro's second-quarter earnings due to the strength of orders ahead of the sequel's release. The toys have wider distribution compared with 2007, he added.
But Johnson expects 2009 Transformers sales to be on par with those of 2007. He cited cautious consumer spending and competition from popular Bakugan action figures that sell for less. Toronto-based SpinMaster sells Bakugan.
Hasbro could not be reached for comment on how the sales have gone so far.
The company reports second-quarter earnings July 20. Analysts expect the toy maker to earn 24 cents a share, compared with 25 cents a share earned in the year-earlier quarter, according to FactSet. Sales are pegged to rise to $797 million from $784 million.
Hasbro is looking to generate more action-figure sales from the Aug. 7 movie release of "G.I. Joe: The Rise of Cobra." Muller of Klosters Trading estimates G.I. Joe movie-related toys will generate sales between $150 million to $180 million in 2009.
Yet Muller warned that G.I. Joe toy sales could be undercut by Transformers and toys tied to the July 15 release of the latest Harry Potter film.
Hasbro shares have fallen 21% for the year to date, compared with a 2% loss for the S&P 500 Index and a 5% loss for Mattel. Investors have become wary of Hasbro since the company announced a kids' TV joint venture with Discovery in late April. McGowan rates Hasbro shares overweight; Crum has a hold on them, Whitfield a buy and Johnson a sell.
The mean target price on the stock is $27.91, down 12% since the start of the year, according to FactSet data.