Toys 'R' Us Closures Hurt Hasbro, But There's One 'Point Of Comfort'

Hasbro, Inc. (NASDAQ: HAS) traded notably lower Monday morning in reaction to a disappointing Q1 earnings report, but by the afternoon was trading in positive territory.

What Happened

Hasbro reported ahead of Monday's open a "terrible" earnings report, Bloomberg's Abigail Doolittle said Monday. Most notably, revenue during the quarter fell 15 percent and the company lost $112 million relative to last year's $68 million profit.

The Toys "R" Us store closures and bankruptcy wasn't the only factor working against Hasbro in the quarter as the toymaker also saw weakness in Europe, she said. However, Hasbro's management reiterated its profit and operating margin outlook for 2018 despite the fact that "segment after segment in the first quarter was lower."

Why It's Important

One "point of comfort" that would explain the stock's turnaround came from Hasbro's management team, who said during the conference call it can fill the distribution hole created by Toys "R" Us with large department stores and even pharmacies or dollar stores, Doolittle said.

What's Next

The case could be made to consider Hasbro's stock attractive, Doolittle said. Specifically, Hasbro's stock is trading at a 25 percent discount to its peers despite the fact that it boasts better growth metrics versus one of its closest peers, Mattel, Inc. (NASDAQ: MAT).

"Could be attractive for the right investor with time," Doolittle concluded.

Hasbro was trading up about 2.7 percent at $85 on Monday afternoon; Mattel was up 3.8 percent at $13.46.

Related Links:

Buy Hasbro As Toys 'R' Us Liquidates, Says KeyBanc Analyst

Not Just A Toy Story: Market Winners And Losers From The Toys 'R' Us Liquidation