• by Sarah Mahoney  @mahoney_sarah, February 7, 2018

More trouble in Toyland: Hasbro surprised observers with a decline in fourth-quarter sales, citing weakness in its Star Wars and Disney Princess lines.

Despite increased spending on advertising, the Pawtucket, R.I.-based toy marketer says revenue for the three-month period fell to $1.6 billion, compared to $1.63 billion in the same period of the previous year. And adjusted net earnings slipped to $291.2 million, compared with $296.5 million in the comparable period of 2016.

Still, S&P Global Ratings is leaving its rating of the company, which sells such brands as Nerf, Play-Doh and Monopoly, unchanged. Despite the weaker-than-expected sales, it says “better-than-expected franchise brand sales partly offset this underperformance. We attribute declining sales of Star Wars to a normalization of annual sales levels, as sales had spiked in early 2016 following the release of Episode VII … the first Star Wars movie to be released in over a decade.”

But S&P maintained its negative rating on Mattel, which last week reported a sales drop of 11% for its fourth quarter, and an operating loss of $252.8 million. The El Segundo, Calif.-based company says it’s making good progress in its transformation plan, and promising a “clean slate so that we can reset our economic model and rapidly improve profitability," CEO Margo Georgiadis, says in its announcement. 

For Mattel, “the negative outlook reflects the high level of variability in revenue … and the uncertainty regarding the success of the company's turnaround plan,” says S&P in its comment. 

The financial fortunes of both companies have been rattled by the ongoing woes of retailer Toys R Us, which filed for bankruptcy in September, which received permission this week to shutter about 180 of its stores, and slashing prices in liquidation sales.

It is also refreshing other stores, cobranding some to include both Toys R Us and Babies R Us in one location.