Over at CNN, Herb Greenberg speculates that the sales of Hasbro’s Spidey 3 toys may not be living up to expectations:
Johnson is one of several analysts warning clients of possibly disappointing ” Spider-Man 3″ toy sales. His first clue: seeing neat shelves of Spider-Man toys at Wal-Mart stores. If the toys were selling well, he figures, the shelves would be a mess. Then Michael Savner of Banc of America Securities wrote in a recent report to clients that he had heard of lower-than-expected sales from “contacts” at several unnamed “major big-box retailers.” The information, he says, was corroborated by NPD Group, the market-research firm. Dean Gianoukos of J.P. Morgan Chase took it a step further, telling his clients that discussions with 40 toy-department managers at Wal-Mart Stores Inc. (WMT) showed that “Spider-Man 3” toy sales were “OK,” but that only 20% of the managers said they planned to reorder. Wal-Mart is the biggest retailer in the U.S. It declined to comment. Target Corp. (TGT) , the No. 2 retailer, said “Spider-Man 3” toys are “meeting our expectations.”
In a tough and competitive retail environment where a lot of summer toys are hitting, a slump could have ramifications for both Hasbro and Marvel.
The risk for Hasbro, Johnson says, is the deal it struck with Marvel: That is because Hasbro agreed to pay a minimum royalty guarantee of $215 million over five years, including an initial payment of $100 million. Sales that don’t reach levels to justify that minimum payment, he says, could cut into earnings.
While the money paid to Marvel is viewed as nonrefundable, Marvel isn’t entirely off the hook. According to Savner, Marvel’s earnings forecasts assume the company will receive far more than it has received in guarantees. “By getting such big guarantees, it has a high hurdle going forward,” Savner says.