Following yesterday’s news regarding continued organizational changes, Hasbro reported its third quarter earnings this morning.
The Rhode Island-based toy and game company says revenue declined 15% (9% excluding eOne) compared to the same period last year with Consumer Products (including toys) dipping 10%. Wizards of the Coast and Digital Gaming slid 5% attributed to tough comps against last year’s launch of Baldur’s Gate 3.
The company says that its owned inventory is down 39% over last year, including a 40% reduction in Consumer Products inventory compared to Q3 2023.
Outperformance within our gaming and licensing businesses in the third quarter highlights the strength in two of our highest profit areas. Our key initiatives around digital, licensing and reinvigorating our product innovation are bearing fruit.”
In the Consumer Products segment, Hasbro says that Transformers, Beyblade, and Furby saw growth alongside an uptick in licensed consumer products revenue for My Little Pony.
On an earnings call this morning, Hasbro executives cited declines in NERF and Star Wars as impacting the business, with Star Wars particularly underperforming in September — a move that led, in part, to adjusted guidance pulled into Q4. The Action Figures category, plagued by overproduction and closeouts in recent years — much of which was offloaded to closeout channels with product landing at Ollie’s and Ross Dress for Less — was called out repeatedly as a focus area for future growth. Meanwhile, Play-Doh is said to have experienced its “best back-to-school season ever,” while the outbound licensing initiatives are paying off with 50% year-over-year growth for Littlest Pet Shop (Basic Fun!) and furReal Friends (Just Play). Additionally, the LEGO Icons Transformers Bumblebee was called out as a success fueled by inclusion in LEGO’s “Adults Welcome” marketing campaign.
The Wizards of the Coast and Digital Gaming Segment saw revenue decrease 5% as growth in Magic: The Gathering (3%) was offset by declines in Licensed and Digital Gaming compared to the Q3 launch window for Baldur’s Gate 3 last year. Scopely’s Monopoly Go! is contributing $10 million a month in licensing revenue to the company, racking up $30 million in Q3 alone.
The Entertainment Segment saw revenue fall of a cliff, with a decline of 86% due to the eOne divesture. With eOne excluded, revenue declined 17% due to the timing of delivery deals. Operating profit of $10 million was a win compared to an operating loss of $469 million in Q3 last year.
By the Numbers:
Operating profit was $302 million with a 23.6% margin, including $27 million in intangible amortization related to eOne and “costs associated with the company’s transformation.” Adjusted operating profit was $329 million, with a 25.7% adjusted operating margin, driven by a favorable business mix, supply chain productivity, and reduced operating costs. The company achieved $87 million in net cost savings and approximately $177 million year to date, aiming to meet its full-year savings goal.
Reported net earnings were $1.59 per diluted share, with adjusted net earnings of $1.73 per share. The company paid $98 million in cash dividends to shareholders.
“We continue to execute our turnaround efforts and are poised to finish the year with improved profitability, cash flow and operational rigor,” says Gina Goetter, Hasbro’s Chief Financial Officer.
In the first nine months of 2024, Hasbro’s overall revenue declined 18%. Growth of 7% in the Wizards of the Coast and Digital Gaming segment was offset by declines in Consumer Products (-16%) and Entertainment (-87%, or +1% excluding the eOne divestiture).
Updated Guidance:
Hasbro issued updated guidance for 2024 with the following changes:
- Consumer Products Segment revenue to be down 12% to 14%; Adjusted operating margin 4% to 6%.
- Wizards of the Coast and Digital Gaming Segment revenue flat to down 1%; Operating margin of approximately 42%.
- Pro-Forma Entertainment segment revenue down $15 million; Adjusted operating margin of approximately 60%.
- Total Hasbro Adjusted EBITDA of $975 million to $1.025 billion.
- Gross savings target of $750 million by year end 2025.
