Hasbro Earnings: Dismal Consumer Products Demand Crushes Sales and Profit Outlook

Narrow-moat Hasbro put up dismal performance in its consumer products division during its fiscal third quarter, displaying a disconnect with consumer interest on top of softening industrywide demand, sending shares tumbling more than 10%. Total sales were nearly $200 million short of our estimate, at $1.5 billion, with the CP segment accounting for the miss, down 18%, affected by the pruning of underperforming brands and a softening discretionary demand environment. The upcoming quarter appears to be in for the same fate (high-teen sales declines), as Hasbro reduced its full-year 2023 CP segment sales forecast to include a mid- to high-teen decline, down from a mid-single digit decline prior. We surmise performance in the CP segment was the impetus in the firm lowering its enterprise level operating margin outlook to 13%-13.5%, materially below the 16% we had forecast previously, given it may take more promotional effort to facilitate conversion. Wizards of the Coast performed better than we expected with sales rising 40%, and entertainment continued to suffer from the writer's strike, with revenues falling 42%.