Hasbro Games Show Signs of Life in iPad World

Hasbro Inc. (HAS), the world’s second-largest toymaker, is showing signs that its games business just may thrive in an iPad world.

Sales of games such as “Monopoly” and “Magic: The Gathering” rose 19 percent to $255.4 million in the second quarter, Pawtucket, Rhode Island-based Hasbro said today in a statement. That was the unit’s third straight sales gain and reverses a 7.6 percent drop in the same period a year earlier.

Hasbro has remade classic products, such as turning “Twister” into “Twister Dance” and incorporating pop music into the game, to lure a younger set accustomed to digital elements in their play. After years of playing catch-up to Zynga Inc. (ZNGA) and others in the market for games played on Apple Inc.’s best-selling tablet, Hasbro two weeks ago acquired a stake in Backflip Studios, maker of titles such as “DragonVale” and “Paper Toss.”

“Hasbro got its head knocked in, in the games area three years ago,” Sean McGowan, an analyst at Needham & Co. in New York, said in an interview. “This is evidence that at least for now they figured it out.”

The good news in the games business lifted the shares amid profit and sales that trailed analysts’ estimates. Net income fell 16 percent to $36.5 million, or 28 cents a share, while sales declined 5.6 percent to $766.3 million. Analysts projected earnings of 34 cents and revenue of $789.7 million.

Hasbro rose 3.3 percent to $46.87 at the close in New York, the biggest gain since April 22. The shares have climbed 31 percent this year, compared with a 19 percent advance for the Standard & Poor’s 500 Index.

Earnings Miss

The earnings and revenue misses were due to declining sales of boys toys, which were up against tough comparisons from a year earlier, when the latest Spider-Man and Transformers films boosted revenue, McGowan said. Revenue from the boys unit fell 35 percent to $253.7 million. The division should rebound next year with a better lineup of entertainment tie-ins, including the fourth film in the Transformers series, and Stars Wars-related television shows, he said.

“What looked like a company that had weakness everywhere, now only has weakness in one area that is almost certainly going to be better next year,” McGowan said.

Hasbro also announced that it extended its merchandising partnership with Walt Disney Co.’s Marvel brand two years to 2020. The extended term includes $80 million in additional royalty payments to Disney.

The toymaker also signed a new deal with the Star Wars brand, which Disney acquired last year from Lucasfilm Ltd. While Hasbro’s previous pact went through 2020, it didn’t account for the decision to release at least three more Star Wars films so it will pay as much as $225 million in guaranteed payments. The seventh film in the Star Wars series is planned for release in 2015, Hasbro said.

Hasbro’s results came after Mattel Inc. (MAT), the world’s largest toymaker, fell the most in 15 months on July 17 amid profit that trailed analysts’ estimates and declining demand for the Barbie brand.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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