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Hasbro Hits Target

But a weak quarter in games keeps revenue below the consensus.
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Hasbro (HAS) beat fourth-quarter profit targets as strong sales of Star Wars merchandise drove a 16% U.S. toy group revenue gain.

For the quarter ended Dec. 25, the Pawtucket, R.I., company made $94 million, or 48 cents a share, up from the year-ago $82 million, or 44 cents a share. Excluding a charge for taxes tied to repatriating foreign profits, latest-quarter earnings were 61 cents a share, 3 cents ahead of the Thomson First Call analyst consensus estimate. Revenue inched forward to $1.07 billion from $1.06 billion a year earlier, hurt by a $21 million exchange-rate setback.

"Hasbro performed well in 2005. In a challenging environment we delivered solid revenue growth, strong earnings growth and operating cash flow was up significantly," said CEO Alfred J. Verrecchia. "While I am pleased with our overall performance, in particular our Star Wars product line, the Games segment performance was below our expectations and clearly there is opportunity for improvement this year."

Fourth-quarter toys segment revenue rose to $306 million from $264 million, driven by Littlest Pet Shop, Furby and Nerf. Core Playskool performed well, although preschool licenses, such as Boohbah and Shrek, were down. Quarterly games revenue fell to $236 million from $270 million a year ago, on lower trading card and board game volume. Full-year operating profit in games fell to $69.5 million from $137.6 million last year, reflecting lower overall segment volume -- in particular, high margin trading-card games. In addition, there were inventory obsolescence and customer allowance charges associated with some of the new plug and play initiatives.