Hasbro's stock drops after another profit miss, downbeat sales outlook

By Tomi Kilgore and James Rogers

Consumer Products, Wizards of the Coast revenue expected to decline in 2024, while Wall Street was anticipating growth

Shares of Hasbro Inc. took a dive Tuesday, after the toy maker reported fourth-quarter results that fell well short of expectations, amid sharp drops in consumer and entertainment sales and as inventory was halved.

The company expects declines in 2024 revenue for both the Consumer Products and Wizards of the Coast business segments, while Wall Street was looking for roughly in-line performances.

"While 2023 was challenging, and we still expect the toy industry to face near-term headwinds, we believe we're taking the necessary steps to turn around our consumer products business," Hasbro (HAS) Chief Executive Chris Cocks said during a conference call to discuss the results.

Hasbro will likely see continued headwinds in the toy category in 2024, according to Cocks, who noted that the company is exiting 2023 with retail inventory down about 20%. "While we think Hasbro's retail inventories in a healthy position across the industry, a lot of older discounted inventory still remains in the market," he added. "The consumer remains value conscious and we anticipate entertainment will be less of a tailwind in the year ahead behind a reduced box office slate."

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Hasbro's stock sank as much as 10% intraday, before paring losses to be down 3.4% in afternoon trading.

Net losses widened to $1.06 billion, or $7.64 a share, from $128.9 million, or 93 cents a share, in the same period a year ago.

Excluding nonrecurring items, such as a negative $7.18-per-share impairment of goodwill, adjusted earnings per share of 38 cents was down from $1.31 and missed the FactSet consensus of 65 cents.

That marked the third straight miss of earnings expectations, and the biggest miss on a percentage basis since second-quarter results of 2020, according to FactSet data.

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Revenue dropped 23.2% to $1.29 billion, below the FactSet consensus of $1.34 billion.

Among Hasbro's business segments, Wizards of the Coast and Digital Gaming revenue increased 10%, as growth in digital gaming licenses offset slight declines in Wizards tabletop and digital games sales.

Consumer Products revenue slumped 25%, with toys and game volume dropping 19%, toy and game rate and mix off 4.7% and license exits contributing a 2.5% decline.

Entertainment revenue sank 31%, as divested film and TV assets contributed a 34% drop while the remaining Hasbro Entertainment revenue fell 11%.

Related: Hasbro to lay off more workers amid toy sales slump

Inventory at the end of 2023 was reduced by 51% from a year ago, including a 56% decline in Consumer Products inventory.

For 2024, the company expects Wizards of the Coast revenue to fall 3% to 5% and Consumer Products revenue to be down 7% to 14%. The average of two analyst estimates compiled by FactSet implied 0.5% growth in Consumer Products sales and little change in Wizards of the Coast sales.

The stock has rallied 9.8% over the past three months, while the Consumer Discretionary Select Sector SPDR ETF XLY has climbed 9% and the S&P 500 has advanced 10.2%.

-Tomi Kilgore -James Rogers

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02-13-24 1344ET

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