Franchise Brands Help Hasbro Grab Market Share

Narrow-moat

We don’t plan to change our long-term outlook, which includes top-line growth that averages 5%, thanks to decent product innovation, low-single-digit domestic sales growth (about half of sales), and high-single-digit international growth. Additionally, as Hasbro scales we see incremental expense leverage. We don’t expect gross margins changing much, given exposure to content that is already high, but see marked improvement in the SD&A ratio over our forecast, which we see falling 150 basis points to 20% from 21.5% in 2016. While inflated in recent years, over 2007-12 Hasbro delivered SD&A metrics that fell below 20%. This leads to operating margins of 18% at the end of our forecast.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.