Hasbro Inc warned of holiday season fallout from the Toys’R’Us bankruptcy, issuing a weaker-than-expected forecast on Monday that sent the toy maker’s shares down 10 percent.
Hasbro, which gets about 9 percent of its revenue from Toys’R’Us, said the Chapter 11 filing raised uncertainty about the timing and amount of toys it would ship to the retailer in the fourth quarter.
The surprise filing last month underscored the Amazon-fueled shift away from brick-and-mortar retailing, and bodes ill for the entire toy industry.
Hasbro’s warning hit rivals – shares of Mattel Inc and Jakks Pacific Inc were down 4 percent and 1.5 percent, respectively.
Toys’R’Us, once the largest toy retail chain in the United States, still owes creditors $5 billion in debt with Hasbro exposed to the tune of $60 million in unsecured claims for payment.
Chief Executive Brian Goldner said the bankruptcy had created a “fluid environment” for the company’s shipments, but downplayed its long-term effect saying it would not hurt 2018 results.
The second biggest U.S. toymaker said it expects fourth quarter revenue to increase 4 percent to 7 percent, or $1.70-$1.74 billion. Analysts on average had expected $1.82 billion.
Morning Star analyst Jaime Katz said the concerns over Toys’R’Us were “overblown” as its debtor-in-possession financing would help it cover most of its payments to toy makers.
Meanwhile, Katz said, Hasbro and Mattel will have more time to find alternate channels to distribute their products.
The toymaker said it had reached an agreement with Toys’R’Us last week over account receivables – outstanding receipts the company is owed from its customers – but there would be a two-day delay in receiving payments over the current cycle.
Hasbro’s outlook follows Jakks Pacific’s warning in September that it would post a loss in 2017 because of the bankruptcy.
Hasbro on Monday also reported third-quarter profit of $265.6 million, or $2.09 per share and a 7 percent rise in revenue to $1.79 billion.
Analysts on average had expected sales of $1.78 billion and a profit of $1.94 per share.