Hasbro kicked off the toy industry’s first quarter earnings season today with positive results that reflect continued resilience amid a host of global challenges.
The global play and entertainment company says that net revenues for the quarter increased 4% to $1.16 billion with modest growth across all three of its reporting segments: Wizards of the Coast and Digital Gaming (9%), Consumer Products (3%), and Entertainment (4%).
“The Hasbro teams executed well in the first quarter, growing revenue across segments and positioning us to increase our profit outlook for the year. Based on our current plans, we now believe mid-single-digit adjusted operating profit growth and a 16% adjusted operating profit margin is achievable on revenue growth of low-single digits,” says Hasbro CEO Chris Cocks. “As I assumed the role of CEO on February 25, we began a thorough review of our business with a theme of focus and scale. We are leaning into our strengths and greatest growth opportunities, including in gaming, multi-generational brands, and direct to consumer.”
Among the biggest challenges for the company are the same issues facing everyone right now, from inflation and supply chain issues to the Russia-Ukraine War.
Sales in Hasbro’s Consumer Products segment, which includes toys and games, spiked 12% in North America and 2% in Latin America but were pulled down overall by a 6% decline in Europe and a 19% decline in the Asia Pacific region. Still, the overall outlook for 2022 is that the company will meet or exceed its goals.
“As we discussed at year-end, pricing increases went into effect in our consumer products business at the beginning of the second quarter and will help offset the higher input and freight costs in future quarters,” says Hasbro’s Chief Financial Officer Deborah Thomas. “Given our cash position and positive outlook, we are resuming our share repurchase program with a plan to repurchase $75 to $150 million this year and remain on target to reach our gross debt to adjusted EBITDA target of 2.0 to 2.5X during 2023.”
The major headwinds facing Hasbro’s Consumer Products segment involve continued supply chain disruptions, including higher freight and inventory costs, increased transit times, and changes to the inventory pattern due to earlier retail orders made in an effort to mitigate out-of-stock situations. In Wizards of the Coast and Gaming, higher paper cost was cited as an issue in addition to the freight and delivery challenges.
Film and TV growth continues on the eOne side of the business with a variety of toy-centric titles hitting streaming, particularly My Little Pony, Transformers, and Power Rangers.
From a brand perspective, Dungeons & Dragons, Magic: The Gathering, Monopoly, My Little Pony, Peppa Pig, PJ Masks, Power Rangers, Play-Doh, and Transformers grew in Q1. Additionally, partner brands, including Star Wars, the Marvel portfolio, Fortnite, and Ghostbusters experienced growth.
Hasbro says that new products tied to Lucasfilm’s May the 4th celebration and the Disney+ debut of Obi-Wan Kenobi are expected to drive Star Wars sales while the Marvel Studios release of Doctor Strange and the Multiverse of Madness is expected to spike sales of Marvel products in Q2.
A call with investors and analysts is scheduled for 8:30 a.m. ET this morning.
