Hasbro Inc posted a higher-than-expected quarterly profit on Monday, citing strong demand for its movie-themed toys, and said its cable TV deal would cost it less than originally thought.
Hasbro, whose shares rose nearly 4 percent, had formed a joint venture with Discovery Communications Inc earlier this year to create a television network. Programs will feature Hasbro brands such as G.I. Joe, My Little Pony and Transformers, as well as Discovery shows like Hi-5 and Bindi The Jungle Girl.
At the time, the world's No. 2 toymaker behind Mattel Inc had said the deal would reduce earnings by 25 cents to 30 cents per share in 2009 and 30 cents to 35 cents in 2010, and its shares had dropped 5 percent.
Now Hasbro expects the deal to cost it only 15 cents to 20 cents per share in 2009 and 25 cents to 30 cents in 2010.
The company also forecast profit and sales growth for this year.
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Investors will like the fact that the guidance is for earnings and sales growth, in the light of the fact that the Discovery kids' dilution will be less than originally thought, said BMO Capital Markets analyst Gerrick Johnson.
MOVIES BOOST SALES
Hasbro's net profit rose to $39.3 million, or 26 cents a share in the second quarter, from $37.5 million, or 25 cents a share, a year earlier.
The results beat the analysts' average forecast of 23 cents a share, according to Reuters Estimates.
Sales rose 1 percent to $792.2 million.
Hasbro has an advantage over Mattel this year because of a lineup of toys tied to movies such as Transformers - Revenge of the Fallen and G.I. Joe - The Rise of the Cobra, which analysts expect will give its sales a much-needed lift in the recession.
The boost comes at a time when toy companies are battling shrinking demand from retailers, which are stocking fewer items in line with weak consumer demand.
Wells Fargo Securities analyst Tim Conder said he expected the benefit from movie-related toys to continue into 2010.
Mattel also posted a profit above Wall Street's expectations last week, helped by cost cuts.
Hasbro shares were up $1.00, or 3.9 percent, at $26.38 on the New York Stock Exchange.
(Reporting by Aarthi Sivaraman; Editing by Lisa Von Ahn and Gerald E. McCormick)