Hasbro: Demand Headwinds Set to Knock Out Holiday Season; Shares Cheap but Near-Term Road Rocky

Sales for the toy industry have struggled in 2023, with Circana reporting U.S. toy sales down 8% through September. When narrow-moat Hasbro reported its third-quarter results (October), the lack of demand was acute, with companywide sales down 10% and an updated full-year outlook calling for the top line to shrink 13%-15%. Although Hasbro was not alone in experiencing weakness across the consumer discretionary landscape, it was disproportionately affected by an entertainment business that faced a writer and actor strike and a consumer product business that was exiting underperforming lines and rightsizing inventory. But customer takeaway has continued to languish, with U.S. toy sales declining 10% in November (Circana/Wall Street Journal), prompting Hasbro to take more extreme measures to adjust its cost base to the evolving environment. The implication of Hasbro’s additional restructuring implies visibility for demand remains weak, sending shares 5% lower in aftermarket trading.