Analyst Note| Jaime M. Katz, CFA |
Narrow-moat Hasbro didn’t fare as well as its narrow-moat peer Mattel in 2020’s third quarter, given its disproportionate exposure to both TV and film, which have been disrupted by a slow return to production and delays in delivery of content. Third-quarter pro forma sales at Hasbro fell 4% to $1.8 billion, versus global point of sales that rose at a mid-single-digit clip (implying the firm is chasing some demand). Emerging brands and the remaining EOne segments bore the brunt of COVID-19-related pressures, falling 18% and 28%, respectively, on a pro forma basis. EOne was hindered by not only lower TV and film revenue but also lower family brands revenue, which saw weak consumer licensee revenue and lower advertising sales (YouTube). Hasbro’s owned franchise brands fared best, with sales rising 4% in the quarter, as traditional play patterns continue to benefit from stay-at-home behavior. Despite disruption in the period, Hasbro eked out an adjusted operating margin of 20.3%, marking a 145-basis-point expansion, thanks to mix gains and cost savings initiatives.