In the latest round of the toy wars, Furby and the Teletubbies beat up Barbie and her friend Tickle
The world's No. 2 toymaker, Hasbro Inc., reported a whopping
75 percent increase in first-quarter profits Thursday, while its
even bigger rival Mattel was announcing a net loss of $17.9
million and over 3,000 job cuts.
Wall Street was confident Hasbro's fortunes would improve
even more in the second quarter, since the Rhode Island-based
company owns the rights to action figures and other products
tied in with the highly-anticipated first episode of the new
Star Wars movie trilogy. In addition, speaking Furby dolls
will be released in five languages and Hasbro said it should
start to see cost savings from its global integration plan.
Hasbro, which also markets Playskool toys and dolls from the
successful pre-school TV show Teletubbies, saw its shares
over $3.375 higher at $33.50 in morning trading, well above the
prior 52-week high of $30.81.
Hasbro's sales to Toys R Us Inc. stores rose almost 30
percent in the first quarter, excluding sales from its lucrative
Tiger Electronics acquisition, the company said in a conference
call. Tiger makes the interactive Furby pets, which were the
most sought-after toy last Christmas, just as Mattel's Tickle Me
Elmo was the Christmas before.
"The inventory changes Toys R Us began implementing last
year had its greatest impact on our first quarter," John
O'Neill, Hasbro chief financial officer, told investors.
The company posted first-quarter net income of $13.8 million
or 7 cents a share, adjusted for a recent three-for-two stock
split, compared with $7.8 million or 4 cents a share in 1998.
Analysts had pegged Hasbro's earnings at 5 cents per diluted
share, according to research firm First Call Corp.
Hasbro had first-quarter worldwide revenues of $688.4
million, up 38 percent from $482.8 million in 1998. Revenues
were driven by Tiger Electronics, which was acquired in April
1998, and by higher sales of computer-based games from Hasbro
Interactive, the company said.
"During the first quarter, normally a slow season, an
average of 250,000 talking Furbys were sold each week," chief
executive officer Alan Hassenfeld said in the conference call.
"Demand is so strong that some retailers are air-freighting
By contrast, it was "trouble in toyland" for Mattel,
despite the fact that its worldwide shipment of all dolls,
including Barbie, was up 26 percent.
Los Angeles-based Mattel, the world's biggest toymaker,
whose products include Barbie and Hot Wheels, reported a
first-quarter net loss equivalent to 7 cents per share better
than estimates by Wall Street analysts, who had expected an
8-cent loss. However, that compared with net income of $12.7
million, or 4 cents per share, in last year's quarter, when
Tickle Me Elmo reigned.
Net sales for the quarter were $692.1 million, down 2
percent from $705.2 million in 1998.
As part of its drive to reduce overhead and advertising
spending and realign operations, chairman and chief executive
officer Jill Barad said some facilities would be closed and
there would be a reduction of over 3,000 positions. She gave no
The merger of Mattel and Learning Co. Inc. , which the
companies expect to complete next month, should also result in
additional cost savings, she said.
Barad said Mattel expects to incur a pre-tax charge of
approximately $300 million to $350 million, to be taken in the
1999 second quarter. She said the company expected to save
approximately $50 million in 1999 and at least $400 million over
the following three years.
Barad also announced that Mattel will spend $50 million on a
new Internet initiative, which is expected to result in the
creation of a new subsidiary later this year, a portion of which
may be offered to the public.