On the heels of Hasbro’s (HAS) blockbuster win over Mattel (MAT) and Jakks Pacific (JAKK) with respect to the Frozen dolls, the brand and licensing giant put up a fantastic third-quarter report Monday. Net revenue leapt 7% in the period, with sales growing in all major operating segments. Emerging markets revenue jumped nearly 30%, while franchise brand sales increased at a faster pace. Importantly, all seven of Hasbro’s franchise brands showed revenue increases during the third quarter. Adjusted operating profit and earnings advanced 9%, though reported results were much more impressive. Compared to Mattel’s ongoing malaise, Hasbro is shining bright.
Hasbro is not so much a toy company as it is a branding and licensing firm. Management echoed our views in the release about the ongoing momentum it is building in its franchise brands and with key partners including Disney (DIS), and we could not be more impressed. The new strategic merchandizing relationship with Disney Consumer Products for the Disney Princess and Frozen properties is a huge win for Hasbro, and we expect the company to benefit from the relationship for years to come. Elsa and Anna, the two princesses in the blockbuster animated film Frozen, may take share from Mattel’s legacy Barbie franchise, something that we are already witnessing. Worldwide gross sales of Barbie were down 21% in Mattel’s most recent quarter. Given the worldwide acclaim of Frozen, Barbie’s reign as the must-have doll could be over. Barbie could now be to girls as baseball cards (CLCT) are to boys – merely a collector’s item that will eventually fade in popularity (and by extension, value).
Followers of Valuentum’s Dividend Growth portfolio have known for a while how much we like shares of Hasbro, and we continue to like them. Our fair value estimate of the firm is $62 per share, and the company yields 3.2%. The company’s dividend growth prospects are fantastic, boasting a Dividend Cushion ratio of 1.9 (the greater the ratio above 1, the better). Hasbro’s weighting in the Dividend Growth portfolio is ~8%.