Franchise Brands Help Hasbro Grab Market Share
We still view the shares as overvalued after second-quarter results.
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.
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