Hasbro Q1 Earnings 2020

Earnings season for the toy industry kicked off this morning with first-quarter numbers from Rhode Island-based Hasbro Inc.

The company reports that net revenues for the quarter declined to $1.1 billion versus $1.2 billion during the same period last year. The numbers reflect a hit from the completion of its acquisition of Entertainment One (eOne) and the first financial impact related to the spread of the COVID-19 pandemic. While global revenues fell, Hasbro saw a 20% increase in the U.S. and Canada as demand for gaming and filmed entertainment grew with families staying home together.

“The first quarter highlights what truly differentiates Hasbro: A global team that meets challenges creatively and nimbly; a diverse brand portfolio and retailer base, including best in class ecomm and omnichannel execution; a strong financial foundation and balance sheet; and a commitment to our purpose of making the world a better place for children and their families,” says Hasbro Chairman and CEO Brian Goldner. “During the quarter, families and friends connected through Hasbro’s robust portfolio of face-to-face games, created with Play-Doh, and engaged in content and imaginative play with our brands and entertainment properties. Our teams worked tirelessly to ensure product could get to consumers while managing the health and safety of our employees and partners globally who are navigating a global supply chain and retail landscape impacted by COVID-19. Point of sale at retail was strong during the first quarter and continues to be up in April.”

As expected, Hasbro Gaming is a key driver in sales with its 30% growth reflecting an overall boom in the gaming category. Magic: The Gathering and Monopoly are leading the charge on that front, while sales of Play-Doh are up in the single digits. The recent launch of Hasbro’s Bring Home the Fun campaign is driving consumer interest. Goldner cites Magic: The Gathering as a sales and storytelling highlight in trading cards, tabletop, and digital as the company’s Wizards of the Coast division continues to support independent hobby shops and engaging fans in various play-at-home initiatives. Classic games including The Game of Life, Connect 4, Operation, and Dungeons and Dragons are also performing well.

Hasbro’s partner brands including Star Wars, Trolls, and Disney Princess and Frozen 2 are showing growth with a 6% increase in the first quarter. The recent in-home launch of Universal’s DreamWorks Trolls World Tour paired with heavy interest in Disney+ content including The Mandalorian (The Child aka Baby Yoda) are drivers. Power Rangers is cited as a highlight for emerging brands with its growth offset by declines elsewhere in the category. Looking ahead, Hasbro says that there is still a home entertainment window on the horizon for Trolls World Tour that remains unchanged and should drive further sales on licensed product as kids revisit the film later this year. Additionally, The Mandalorian season 2 is slated for a fall release and preorder sales for the animatronic version of The Child remain strong.

Emerging brands took a 19% hit for the quarter. Goldner says that NERF Ultra and Beyblade are also performing well.

The new TV/Film/Entertainment category declined 29% as revenues from eOne productions fell. The company expects production to resume in the third quarter. eOne’s family brands, including PJ Masks, Peppa Pig, and Ricky Zoom, continue to grow. New properties are in development and are expected to receive greenlights in the months ahead. Writing and other creative teams are continuing to work remotely. Looking ahead, the eOne development slate is just beginning to take shape. The company has approximately 100 TV projects in active development, including 15 from the Hasbro portfolio. A total of 21 projects from the Hasbro portfolio are in development for film alongside 40 other theatrical productions.

“We’ve undertaken extensive scenario planning across the business and geographies as we plan for a re-opening of the economies globally,” Goldner says. “At the same time, we made significant progress on the integration of eOne and while near term much of the team’s production work has been delayed due to COVID-19, we are actively working together to unlock value from our brands and the eOne enterprise. Hasbro is creating play and entertainment experiences which are vital and desired by consumers and audiences this year and for the years to come.”

The company says it expects the second quarter to be even more challenging and has withdrawn its 2020 guidance issued during Toy Fair New York. Goldner says that the biggest challenge is access to consumers due to retail closures. With many stores still closed globally — particularly specialty retailers and independent toy stores — Hasbro has seen 60% growth in e-commerce and omnichannel retail. Its Hasbro Pulse direct-to-consumer platform continues to be used to sell product while engaging fans and collectors.

Hasbro Chief Financial Officer Deborah Thomas reiterates the challenges of the second quarter but stresses that the company is in a good position in terms of liquidity.

“The global team did a tremendous job navigating the challenges of the first quarter,” Thomas says. “Toward the end of the quarter, physical store closures and country-wide restrictions became more prevalent and entertainment productions shut down. As a result of COVID-19, we expect the second quarter to be more challenging than the first quarter of the year with revenues and earnings down versus pro forma 2019. We are taking prudent steps to lower expenses and preserve capital while positioning to meet the seasonal peak demand periods of the business in the second half of the year, including the holiday season. While the ultimate impact of COVID-19 will vary depending on how long it takes to reopen markets around the world, we are currently seeing healthy demand for our products and content.”

On a full-year basis, Thomas says that a very strong holiday season is coming.

Additionally, the company is shifting its advertising focus, largely moving from linear TV to social and digital, including original promotional productions such as NERF House, as the company refocuses to reach consumers on emerging platforms.

About the author

James Zahn

James Zahn

James Zahn, AKA The Rock Father, is Editor-in-Chief of The Toy Book, a Senior Editor at The Toy Insider and The Pop Insider, and Editor of The Toy Report, The Toy Book‘s weekly industry newsletter. As a pop culture and toy industry expert, Zahn has appeared as a panelist and guest at events including Comic-Con International: San Diego (SDCC) Wizard World Chicago, and the ASTRA Marketplace & Academy. Zahn has more than 30 years of experience in the entertainment, retail, and publishing industries, and is frequently called upon to offer expert commentary for publications such as Forbes, Marketwatch, the Wall Street Journal, the New York Times, USA Today, Reuters, the Washington Post, and more. James has appeared on History Channel’s Modern Marvels, was interviewed by Larry King and Anderson Cooper, and has been seen on Yahoo! Finance, CNN, CNBC, FOX Business, NBC, ABC, CBS, WGN, The CW, and more. Zahn joined the Adventure Media & Events family in 2016, initially serving as a member of the Parent Advisory Board after penning articles for the Netflix Stream Team, Fandango Family, PBS KIDS, Sprout Parents (now Universal Kids), PopSugar, and Chicago Parent. He eventually joined the company full time as a Senior Editor and moved up the ranks to Deputy Editor and Editor-in-Chief.

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