Hasbro's Transitory Inventory Overhang Doesn't Threaten Long-Term Margin Opportunity

Hasbro continues to hold a leading position in the more than $30 billion North American toy industry (Euromonitor), developing, manufacturing, and marketing well-known global brands that include Transformers, My Little Pony, and Nerf. The firm operates a relatively differentiated business model, thanks to its digital properties exposure, content creation ability, and key licensing arrangements, abilities that were elevated with the 2019 tie-up of Entertainment One (EOne). Additionally, production capabilities support Hasbro's multimedia presence, as does Discovery Family, a joint venture that brings Hasbro's brands to television, bolstering the firm's brand blueprint strategy. Furthermore, Hasbro has historically dominated the big-screen, building brand loyalty and generating new streams of revenue from its licensing businesses (like Star Wars and Marvel). We think Hasbro and the toy industry have a decent runway for growth ahead through international growth (Asia-Pacific and emerging markets still provide longer-term growth potential through share gains) and acquisitions of strategic players that fit into Hasbro's portfolio (most recently D&D Beyond).