Hasbro's Brian Goldner. Picture: REUTERS
Hasbro's Brian Goldner. Picture: REUTERS

New York — The demise of Toys "R" Us took a toll on Hasbro, which posted worse than expected results in the first quarter.

Hasbro posted declining sales in all business areas in the quarter, sending shares down as much as 9.1% in early trading.

The toy maker said the drop was a result of the Toys "R" Us liquidation, as well as "uncertainty" in some operations and excess inventory in Europe. "We are working to put the near-term disruption from Toys "R" Us behind us," CEO Brian Goldner said.

The retailer, one of Hasbro’s largest customers, filed for bankruptcy in September, had a terrible fourth quarter and then announced the liquidation of several divisions, including the US. This has presented another hurdle for toy makers that were already dealing with slowing growth and concerns that the success of making so many products based off an ever-growing slate of kids’ entertainment is waning.

The Toys "R" Us effect could be seen in Hasbro ’s results. In North America, sales sank 19%. Revenue dropped even more in Europe, with a decline of 28%. The liquidation also generated expenses of $61.4m.

The world’s largest publicly traded toy maker, based in Pawtucket, Rhode Island, lost $112.5m in the quarter, versus a profit of $68.6m a year earlier. Sales of franchise brands, which include Transformers and My Little Pony, collapsed 19% to $361.7m in the period.

Goldner has said revenue will take a hit in 2018, but other retailers, such as pharmacies, will fill the market void left by Toys "R" Us by 2019.

"Our global retailers view this as an opportunity in a key consumer category and are partnering with Hasbro to develop growth plans for our brands," he said.

Hasbro shares dropped as low as $75.30 in premarket trading. They had declined 8.9% this year to Friday’s close.

The first quarter, which runs through March, is Hasbro’s smallest by revenue. This is usually when toy makers are rebuilding inventory for the rest of the year.

Overall sales in the period sank 16% to $716.3m, the company said. Analysts had estimated $821.2m on average.

Excluding the Toys "R" Us costs and other items, profit dropped to 10 cents a share, compared with projections for 32 cents.

Bloomberg