Hasbro, the toy manufacturer, is echoing Barbie-maker Mattel in cautioning that the upcoming holiday season might be lackluster, reflecting a trend of cautious consumer spending during this crucial period for retailers.
Demand within the toy industry has reportedly diminished following an initial pandemic-driven surge, as consumers divert their budgets to meet essential household expenses in response to escalating prices.
According to Hasbro’s most recent quarterly earnings report, the company is realigning its efforts to restore its overall financial well-being. To start, the company is moving ahead with the sale of eOne, which is reportedly progressing as planned and set to close by the end of the year.
In August, PYMNTS announced that Hasbro’s decision was to divest its film and TV business to refocus on toys and games. As per a press release in August, the company has reportedly finalized an agreement to sell its film and TV business, known as eOne, to Lionsgate for an estimated $500 million.
The sale includes a team of employees, an extensive library of nearly 6,500 titles, and ongoing productions related to non-Hasbro-owned intellectual property.
“The sale of eOne is another important milestone in our transformation at Hasbro,” Hasbro CEO Chris Cocks said at the time. “Last year, we articulated a plan to turn around Hasbro, driving growth in fewer, bigger, more profitable brands; improving our consumer focus, execution and innovation; and building our operational excellence to fuel our bottom line and create sustainable performance.
“At the highest level, it’s a plan about recentering Hasbro on what has helped us create one of the most valuable portfolios of brands in toys and games: the timeless power of play,” Cocks added.
Additionally, on Thursday (Oct. 26), Hasbro said its strategic approach included simplifying its operational model and centering the organization on its core mission. Looking ahead, Hasbro will drive its entertainment initiatives through a franchise-led strategy while maintaining an asset-light approach, with a primary focus on enhancing twin game sales in collaboration with top-tier content partners.
Hasbro’s entertainment portfolio includes more than 30 projects, spanning a spectrum from movies like the Transformers film in partnership with Paramount to an animated Magic series in collaboration with Netflix, as well as digital-first intellectual property development like the YouTube series on AWS.
The company is also looking to improve gross margins and product quality while maintaining competitiveness. This includes introducing cost-effective, high-margin products like a redesigned version of Jenga. These efforts span the product lineup.
“We are making good progress on our transformation and the work we have done to date has positioned us well to grow our world-class gaming portfolio and strengthen our toy business,” said Gina Goetter, Hasbro chief financial officer in a statement. “We continue to make progress in lowering inventory levels and are on track to meet our long-term gross cost savings goals earlier than expected.”
In Q3, Hasbro reported a 10% decrease in revenue.
While their Wizards of the Coast and Digital Gaming segment grew by 40%, it couldn’t offset the declines in the consumer products (-18%) and entertainment (-42%) segments. The growth in Wizards of the Coast revenue was driven by licensed digital games, but consumer product revenue declined due to license discontinuations and softer trends in the category.
The company reported an operating profit loss of $169.5 million, which improved to an adjusted operating profit of $342.6 million with a margin of 22.8%. This margin improvement was attributed to cost savings and digital game growth.
Hasbro is working toward achieving $200 million in gross cost savings in 2023 and has reduced inventory by 27%. The 2023 guidance was adjusted to reflect lower revenue expectations for the consumer products segment.