Hasbro beat expectations in the third quarter of 2020 with earnings that topped estimates as sales for toys and games boomed globally.
Net revenues in the U.S. grew 9% to $977.1 million versus $898.3 million in the same period last year. Net revenues declined 4% to $1.78 billion versus $1.86 billion last year due to the production disruption caused by the COVID-19 pandemic for the combined Hasbro and Entertainment One (eOne), paired with slow retail reopenings in Latin America, which pulled down the international segment. Net earnings hit $220.9 million, or $1.61 per diluted share, versus net earnings of $216.5 million, or $1.57 per diluted share, last year.
“Hasbro’s third quarter performance was the result of great work from our global team and continued growing consumer demand for Hasbro brands in most markets,” says Brian Goldner, Hasbro’s chairman and CEO. “Our broad, innovative product line, including leadership in gaming, excellence in global e-comm, and compelling marketing campaigns drove meaningfully better performance in the third quarter. Building off this quarter’s growth in toys, games, and digital, we are positioned to deliver a good holiday season. Live-action entertainment production is returning, and we are set to improve deliveries in the fourth quarter, with some moving into 2021. While COVID-19 remains a factor in our global operations, consumers remain engaged in activities that create joy and personal connections and we are working purposefully to deliver them the world’s best play and entertainment experiences while remaining focused on the safety and well-being of our global teams and communities.”
Revenue in Hasbro’s owned franchise brands grew 4% in the quarter while Hasbro Gaming grew 3%. When combined, Hasbro’s total gaming category includes a 21% increase in revenue driven by Magic: The Gathering and Monopoly, which are reported in the franchise brands category. On this morning’s call with investors and analysts, Goldner noted that Magic: The Gathering Arena has racked up more than 2.8 billion played games, which means players are averaging 9 hours of gameplay each week. Partner brands fell 4%, emerging brands — which include eOne’s PJ Masks, Peppa Pig, and Ricky Zoom — declined 18%, and TV/film/entertainment declined 28%.
Notably, Hasbro ran into some supply issues on restocking top games that sold well during the spring months. The supply chain has rebounded and the company says that it’s well-stocked for the holiday season ahead.
“Hasbro’s partner factories and warehouses are open and operating and production is largely in line with demand,” says Deborah Thomas, Hasbro’s chief financial officer. Thomas also notes that sales of some licensed goods — particularly related to Disney Frozen and Marvel — have declined, and that the company is paying attention to how its licenses are lining up with sales declines of related consumer products in other categories such as apparel.
Overall sales increases at POS in the third quarter have continued into the start of the fourth quarter. Goldner highlights double-digit growth in Magic: The Gathering and Play-Doh with high double-digit growth in Star Wars driven by products inspired by Star Wars: The Mandalorian, alongside increases in Disney Princess, NERF, and Beyblade.
“Hasbro’s products for Star Wars delivered strong growth in the third quarter,” Goldner says. “Disney+ continued to drive engagement among kids and fans alike. Results were fueled by August shelf sets of our wide range of items for The Child as well as continued global strength in our fan business, particularly within our 40th Anniversary Empire Strikes Back product and our Retro figures. This year, we also launched a Star Wars: Galaxy’s Edge exclusive program [at Target] designed to capture the parks’ experience at retail.”