Hasbro Plays With ‘Fewer, Bigger, Better’ Strategy Amid Bite of Lingering Inflation

The largest U.S. toy and game maker said it expects lingering impacts from inflation to dampen consumer spending for most of the year but is counting on its revamped corporate strategy to mitigate some of those headwinds.

The comments from Rhode Island-based Hasbro come as the now self-titled “global branded entertainment” company released its Q4 and full year result, as well as a cautious forecast that predicts sales will be down low-single-digits for the year, after dropping 17% for the three months ending Dec. 25.

“While Q4 proved to be a disappointment, particularly in our traditional Toys and Games segment, we made progress under the hood that meaningfully improved our bottom line and sets us up for margin expansion in 2023 — despite what we anticipate will be a continued challenging consumer environment,” Hasbro CEO Chris Cocks told investors on the company’s Q4 earnings call.

Disappearing Demand

The company’s weak forecast and soft Q4, which was pre-announced in late January, come as Cocks will mark his first anniversary as CEO on Feb. 25 as well as the execution of his Blueprint 2.0 strategy that was unveiled in October. 

As for the trailing results, Cocks told investors the company was too aggressive in some of its pricing assumptions and also misfired on updating its open game license — both of which the new CEO said have since been corrected. 

Add in $300 million of ongoing headwinds from foreign exchange and exiting low-profit brands licensing businesses, but said the “fewer, bigger, better, pillar” of Hasbro’s strategy would increasingly pay off over time. 

As the company shifts its focus to a handful of big brands that are more profitable, Cocks said the company would have a “sharpened focus on the categories where Hasbro can be best in class,” with efforts to also improve operational excellence, speed, agility and cost competitiveness in four core growth areas; digital games, Hasbro content, direct to consumer, and licensing.

Bright Spots

Beyond the declines and weakness, Cocks also mentioned several bright spots and milestones in his meeting with analysts and investors, who had bid the stock higher in early trade Thursday morning following the earnings report after beating it down by close to 40% since Cocks took control 50 weeks ago.

“We have one of our strongest content lineups in a decade, including six blockbuster films, a host of new streaming series, and some of the strongest new product innovation for Transformers in years set against the launch of the Rise of the Beast feature film in June,” Cocks said,  

In addition, Cocks highlighted the fact that its Magic the Gathering franchise became the first billion-dollar brand at the company, which was founded in 1923 and will mark its 100th anniversary this year.  

Cocks framed the milestone as a win for the company, customers and consumers. 

“[This] is a huge milestone, not just for Hasbro, but for the 1000s of hobby shops that are our most important and fastest growing channel for the brand, and millions of fans who make both Magic the Gathering and Dungeons & Dragons more than just games, but vibrant global communities,” he said.

Toy Biz is No Game

To be sure, Hasbro is not alone in facing a changing consumer in a challenging economy at a time when the core business is becoming increasingly focused on digital and media content projects.

A week ago, rival Mattel — which is now about 20% smaller than Hasbro’s $8.2 Billion market value and almost even in its 2022 annual sales of $5.3 billion. 

 In speaking with investors, Mattel CEO Ynon Kreiz said the California-based brand also took a 22% sales hit due to overstocked retailers and more cautious consumer spending.

“Our fourth quarter results were below our expectations as the macroeconomic environment was more challenging than anticipated,” Kreiz said, pointing to double-digital point-of-sale growth late in December, which he said “came later than expected and was not enough to offset lower-than-anticipated consumer demand in October and November.”

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