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Why Hasbro Stock Tumbled Today

Motley Fool - Thu Oct 26, 2023

Shares of Hasbro (NASDAQ: HAS) were falling today after the toymaker underwhelmed the market in its third-quarter earnings report, missing estimates on the top and bottom lines and slashing its guidance for the year.

As a result, the stock was down 10.2% as of 11:44 a.m. ET.

A kid playing a mobile game at home.

Image source: Getty Images.

Hasbro comes up short in Q3

The toymaker known for brands like Transformers and board games like Monopoly missed the mark on the top and bottom lines this morning as the toy industry struggles to escape a post-pandemic rut.

Overall revenue was down 10% to $1.5 billion, well short of estimates at $1.65 billion.

Revenue at the Wizards of the Coast and digital gaming segment was up 40%, while sales at the consumer products and entertainment segments fell 18% to 42%, respectively. The company said consumer products revenue, which makes up more than 60% of total revenue, declined as it exited license agreements and because of softer category trends. Nonetheless, it gained market share in four of five "focus categories."

The company also took a pre-tax loss of $473 million on assets from the planned sale of its eOne Film and TV business.

Adjusting for that, operating profit improved from $270.5 million to $342.6 million, due to cost savings and the growth of licensed games. On the bottom line, adjusted earnings per share rose from $1.42 to $1.64, but that still missed the consensus at $1.71.

Referring to cost-cutting plans and other moves, CEO Chris Cocks said, "We are taking action to address the tougher macro environment across toys and entertainment and are positioning the company to return to profitable growth."

Guidance also missed the mark

Management lowered its guidance for the year due to the weak performance in consumer products. It now sees revenue falling 13%-15%, compared to an earlier forecast of just a 3%-6% decline. In consumer products, it expects a mid-to-high-teens decline in consumer products.

Shares of rival Mattel were also down today, showing broader weakness in the toy industry.

While Hasbro has significant plans to overhaul the business, and profitability is moving in the right direction, consumer demand will have to return for the stock to bounce back.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Hasbro. The Motley Fool has a disclosure policy.

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