Dueling Fools
Is Hasbro a Has Been?
May 19, 1999

The Bear Rebuttal
by Rick Aristotle Munarriz ([email protected])

So Hasbro is this "library of brands" now, is it? To that analogy all I can offer is a librarianesque "Shhhhh!" Licensing deals make up many of these bound brand texts in this so-called library -- it's a pity they are borrowed. How do you land a WCW or a Pokemon license? It's simple. Be the highest bidder and it's yours. This may be the way to higher sales, but it is not the oft-beaten path to smarter earnings.

That is why Hasbro's margins, year after year, fall short of toy leader Mattel's. That is also why, despite the Teletubbies being all the kiddie rage last year, that Hasbro couldn't do any better on the bottom line than it did five years ago.

So do we applaud a company just because it is building up debt and promising huge sums of future royalties for a shot at incremental, low-margin licensing sales? If this is a library then, like a book longing to return, a correction is more than overdue.

If there's anything I've learned from this Duel it is that I don't want to play Monopoly with Louis. No way. He has a house on Baltic Avenue and wants you to believe it's a hotel on Park Place. He brings up Hasbro's first quarter performance as if it's something relevant. Folks, this is a seasonal company where the first quarter is nothing. Great numbers? The company earned just 6% of its trailing year earnings in that quarter. As the year wears on toward the meatier holiday selling season, you will see how Star Wars toys may bulk up sales but with crumbling margins.

Then again, the holiday shoppers will be hitting the malls more than six months after Phantom Menace opens. Out of sight, out of mind maybe?

In the end, I just don't see why someone would pay a premium for a company that isn't even the leader. Louis calls the balance sheet "solid" but I think he's playing with more Hasbro toys again. He's disfiguring the Mr. Potato Head of reality. Accounts Receivables outpacing sales? Growing debt? Solid? I don't think so. This is about as solid as Jabba the Hutt's gut -- who also serves as a fitting mascot for a company that could stand to shed some of the excess, and probably will.

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