Tuesday December 7 3:16 PM ET Hasbro to Cut Jobs in Restructuring

Hasbro to Cut Jobs in Restructuring

PAWTUCKET, R.I. (Reuters) - Hasbro Inc. (NYSE:HAS - news), maker of Furby, Star Wars and Pokemon toys, on Tuesday said it would slash 2,200 jobs in a sweeping restructuring to take advantage of growing demand for electronic toys.

The No. 2 U.S. toy maker also said it would de-emphasize certain areas of its U.S. business, primarily in preschool, creative play and girls' toys, focusing instead on proven brands and licenses such as Play-Doh, Teletubbies, and Barney the dinosaur.

Where Hasbro once offered three or four new large dolls a year, it will now release one or two.

It is the second restructuring in three years at Hasbro. In December 1997 the company announced 2,500 job cuts.

Hasbro said its latest steps would include reducing its work force by 19 percent and consolidating manufacturing, product lines and sourcing activities. It said it would close manufacturing plants in Tijuana, Mexico, and Ashford, England, accounting for 1,850 of the job cuts. Production from those facilities will be moved to other Hasbro plants and to Asia.

Hasbro Chairman and Chief Executive Alan Hassenfeld said in a statement, ``As we transition Hasbro from a toy and game manufacturer to being a leader in children's and family leisure time and entertainment, we must realign our business to support our commitment to technology and game play.''

Hasbro shares were down 1-1/8 to 20-5/16 in afternoon trading on the New York Stock Exchange, well below their 52-week high of 37.

Hasbro said the restructuring would result in fourth-quarter charges totaling $141 million for asset write-downs, discontinued product lines, product lines with reduced expectations, and other restructuring steps.

The company said it expects earnings in the fourth quarter before the charges to be in line with analysts' current expectations. It also said the consensus estimate for the full year 2000 should not be affected.

Analysts expect Hasbro to earn 76 cents per share in the fourth quarter and $1.54 per share for the year 2000, according to research firm First Call/Thomson Financial.

Hasbro said its moves should create savings of $16 million before taxes in 2000 and $23 million a year thereafter.

Analyst Thomas Graves of S&P Equity Group said the restructuring, following the 1997 measures, showed Hasbro ``took their eye off the ball in terms of cost-containment.''

Graves cut his rating on the stock to ``hold'' from ''accumulate'' and shaved a nickel from his per-share earnings estimates, to $1.40 per share for 1999 and to $1.55 in 2000.

``They could have been more effective in weeding out their product line ... they could have done some of that earlier rather than doing it now,'' he said.

David Leibowitz of Burnham securities said, ``The electronics revolution has clearly affected the toy industry in the last three years ... Hasbro and the other manufacturers have had to respond.''

Recent times have been turbulent in the toy industry. Industry leader Mattel Inc. (NYSE:MAT - news), maker of the Barbie and Hot Wheels lines, was punished by investors when its recently acquired Learning Co. software unit lost $105 million in the third quarter. Mattel's stock, trading at 14-5/16 on Tuesday afternoon, remains far below its 52-week high of 32-7/16.

But Leibowitz said Mattel's problems are unique to that company. ``Hasbro is enjoying record sales, and earnings are up 30 percent -- they have some of the hottest products in the industry,'' including Pokemon, Star Wars and Furby products.

He said the Pokemon craze, which encompasses several products, makes up for the fact that there isn't a single, must-have toy this holiday season. ``Pokemon is clearing the shelves at a phenomenal pace,'' he said.

Hasbro sells 70 different Pokemon products.

Hasbro said that while sales of its Star Wars line of toys has slowed, it has entered into price cut and promotion deals with retailers to boost sales.

The company also said its board had approved the repurchase of up to $500 million of stock, which it will pursue after it completes a $500 million stock buyback authorization set two years ago. It has spent $415 million to repurchase more than 16 million shares under the December 1997 buyback plan, it said.

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