Source: Hasbro

Hasbro Inc. reported a 29% drop in revenue for the second quarter of 2020, reflecting the challenges of operating amid the COVID-19 pandemic.

The Rhode Island-based toy and entertainment company took expected hits across its business, including Entertainment One (eOne), for a combined 19% decline for the first six months of the year despite the overall U.S. toy industry seeing a 16% sales increase during the same period. Hasbro Gaming spiked 11% in Q2 as families stayed and home and played together, and the company expects a strong holiday season ahead.

“The global Hasbro team is executing our playbook amidst a dynamic and challenging environment. They are doing so with creativity and agility, identifying new and efficient ways to operate, capitalizing on our investments in creating a digital-first orientation while keeping our innovation engines moving and leveraging the expertise of a management team that has led through challenges in the past,” says Brian Goldner, Hasbro’s chairman and chief executive officer. “The second quarter was much as we expected: strong point of sale (POS) for Hasbro brands countered by a very challenging revenue period due to global closures in our supply chain, across retailers as well as in entertainment production. We believe the outlook improves from here. Consumers — children, families, fans, and audiences — are relying on Hasbro brands and stories to connect and entertain themselves throughout this period. While the full-year COVID-19 impact geographically remains unpredictable, as stores reopen and we begin to return to production for entertainment we expect the environment to improve in the third quarter and set us up to execute a good holiday season.”

Hasbro Gaming revenues grew 20% for the first six months of the year, driven by sales of classic games including Connect 4, Jenga, Twister, Battleship, and Mouse Trap. The category, which does not include Wizards of the Coast, had a 50% global POS increase. As expected, Wizards of the Coast’s Magic: The Gathering declined in Q2 with numbers running up against a major new release during the same period last year and many local game stores remaining closed due to the pandemic. Digital revenues for Magic: The Gathering Arena increased slightly.

Hasbro’s Bring Home the Fun campaign led connection with families, while Hasbro Pulse — which Goldner says remains a small percentage of sales overall — is driving collector interest, most notably with its most successful HasLab crowdfunding effort to date: The Marvel Legends X-Men Sentinel, which exceeded its goal in less than 24 hours.

Source: Hasbro

Hasbro’s partner brands fell 35% in Q2 despite growth in products tied to Disney’s Frozen 2, Lucasfilm’s Star Wars, and Universal’s Trolls World Tour. The company cited a decline in sales of Marvel products, which were partially impacted by the delay in Marvel Studios’ Black Widow and running up against last year’s numbers for Avengers: Endgame and Spider-Man: Far From Home.

Lack of live experiences and events have hurt in some areas, particularly in being able to tour and promote music releases from eOne.

An accelerated move to digital sales led to 30% of Hasbro’s product sales coming from e-commerce and omnichannel in Q2.

FUTURE OUTLOOK

Hasbro says it is looking forward to a strong holiday season fueled by new product launches and strong demand from families.

“We believe that the third quarter is the beginning to the road to recovery,” said Hasbro CFO Deborah Thomas on a morning call with investors. The company reports an uptick in POS and demand in Q3 mirroring reports from elsewhere in the industry.

Some new products have been pushed back slightly by four to seven weeks due to production and supply chain disruption. That said, Hasbro’s supply chain is up and running with just 55% of the company’s product mix being produced in China. Factories in other locations, including the U.S., Ireland, and India, have reopened. Entertainment production for eOne projects is beginning to resume.

In the past 6 to 8 weeks, NERF sales have been up double-digits. New NERF Ultra, Rival, and Elite products will debut this fall. New Monopoly games, new Star Wars products — including those tied to season two of The Mandalorian — a new Dungeons and Dragons starter set, and additional new games are on the way. Sales for Hasbro franchise (owned) brands has increased in recent weeks.

Looking beyond the back half of the year, Hasbro says it expects to start bringing products for eOne brands in house, and should start seeing the payoff from the synergies between the combined Hasbro/eOne.