In the board game Monopoly, one player's bankruptcy doesn't force everyone else to stop.
The remaining competitors, however, usually find it significantly tougher to make money. The game's maker, Hasbro, encountered a similar phenomenon after one of its major customers, the iconic retailer Toys R Us, collapsed this year.
The Pawtucket, R.I., toy producer posted a loss of $112 million, or 90 cents a share, in the first three months of 2018, as revenue slid 16 percent amid the liquidation of Toys R Us in the U.S. and the U.K. and Hasbro recorded a $61.4 million charge, primarily for bad debt.
"Our business would be in a very different short-term position with Toys R Us still in existence in the United States, but the fact is it isn't," Hasbro CEO Brian Goldner said on an earnings call. "And so our teams are moving quickly to transition and transform and to move forward."
The impact of the chain's demise will be most pronounced in the first half of this year, fading as the holiday shopping season draws closer, Goldner noted. The U.S. liquidation is likely to be completed by the end of June, and the status of international operations is unclear, he said.
Working through the disruption completely may take a year or more, executives projected, and Hasbro doesn't expect further material costs from Toys R Us.
"We are facing near-term disruption in the market, but we have confidence in our long-term prospects," finance chief Deborah Thomas said on the call. "Consumers are seeking out and purchasing Hasbro brands, and we have a very strong lineup for the rest of the year."
Other global retailers are excited about the chance to pick up some of the market share held by Toys R Us, Goldner said, and those stores are adding space and planning additional promotions.
"Having had a number of good retail meetings recently, our retailers are very excited," he said. "I believe that the opportunity to absorb all of the Toys R Us business is present, and in fact, we're just building those plans to do that. It just takes some time."
The loss of the 735 stores that Toys R Us operated in the U.S. may cost Hasbro and rival Mattel as much as 4 percent of their sales this year, B. Riley Financial analyst Susan Anderson estimated earlier this year. Bloomberg analysis indicated merchandise for its worldwide stores generated about 9 percent of Hasbro's revenue and 8 percent of Mattel's.
Mattel plans to report its first-quarter earnings on Thursday. Hasbro has fallen 5 percent this year to $86.12, while Mattel — whose CEO, Margo Georgiadis, resigned last week to take the top job at Ancestry.com — has tumbled 10 percent.