Toy maker Hasbro disappointed investors with its results on Thursday, joining Barbie-maker Mattel in warning of a weak holiday season and indicating that consumers are being frugal heading into the most important period for retailers.
Demand across the toy industry has weakened since a pandemic surge as consumers reallocate their budget to cover for household essentials amid rising prices and higher borrowing costs.
Hasbro expects 2023 revenue to tumble 13 per cent to 15 per cent compared to a prior forecast of a 3 per cent to 6 per cent decline. Shares of Hasbro sank 13 per cent, while Mattel’s stock plunged 18 per cent in early trading.
“Retailers will remain cautious with their inventory positions which will have an impact on typical holiday order patterns,” CFO Gina Goetter said on a post-earnings call.
The Monopoly maker’s third-quarter revenue and profit also missed market expectations, with revenue from its core toy business dropping 18 per cent as shoppers cut back on non-essential spending.
Its digital and licensed gaming revenue, however, grew 40 per cent on strong demand for its “Monopoly Go” and “Baldur’s Gate III” games.
“Hasbro’s earnings reflect the reality of the challenges facing the broader toy industry this year. In many ways, 2023 has been a reset year,” said James Zahn, editor of trade magazine The Toy Book.
A day ago, rival Mattel flagged slowing demand ahead of the holiday season, even as its third quarter benefited from the box-office success of “Barbie” movie.
The maker of Transformers action figures expects its toy business to decline in mid– to high-teens for the year compared with mid-single digits decline it forecast earlier.
“Our near-term focus is on executing the holiday season, resetting the cost base ... and sharpening the innovation pipeline for 2024 and 2025,” Goetter said.
Quarterly net revenue fell to $1.50-billion, missing estimates of $1.64-billion, according to LSEG data. Excluding certain items, it earned $1.64 per share, below expectations of $1.70.