Hasbro's Q2 Slump but Eyeing a Mattel Bid 💪💭💰
Revenue drops 18% for Hasbro, but earnings show positive growth
What's Happening: Hasbro's Q2 revenue took a hit, dipping 18% year-over-year to $995 million, compared to $1.2 billion in the previous year. Excluding the sale of its eOne film and TV business, revenue dropped by 6%. The toy giant reported an operating profit of $212 million, a major turnaround from last year's near-$189 million loss. Net earnings for the quarter were $138.5 million, a significant improvement from a $235 million net loss the previous year. Hasbro claimed $40 million of net cost savings for the quarter and around $90 million year-to-date, setting them on track to meet their full-year savings goal.
Segment Breakdown: Wizards of the Coast and digital gaming revenue skyrocketed by 20% to $452 million. Entertainment revenue plummeted 90% to $18.8 million, or 30% excluding the eOne sale. Consumer products revenue also took a hit, falling 20% to nearly $525 million, resulting in a $9 million operating loss for the quarter. Hasbro attributed the decline to business exits, reduced closeouts, and entertainment timing.
CEO's Take: CEO Chris Cocks stated during a Thursday earnings call that Hasbro's performance on consumer products was in line with expectations, and the company is becoming more profitable and refining operations. The earnings came as rival Mattel reported Q2 net sales slipped 0.7% to $1.1 billion, while net income rose to $56.9 million. Mattel kept quiet about rumors involving private equity firm L Catterton's interest in a takeover and Hasbro's potential offer.
Digital Growth: Cocks emphasized that digital is a key part of the company's growth and the industry's growth overall. He acknowledged that while Hasbro is "still in the middle of the long game on our turnaround efforts on toys," they're seeing indications their innovation is working, especially in areas where they have a significant edge over the competition.
Kidult Embrace: Cocks revealed that over 60% of Hasbro's revenue is derived from consumers aged 13 and up, a group the industry refers to as "kidults." He expressed confidence in continuing to focus on innovation across the product portfolio to serve this demographic.
Revised Guidance: Hasbro revised its full-year guidance, expecting consumer product segment revenue to decline 7% to 11%, an improvement from the previous range of 7% to 12%. Wizards of the Coast segment revenue is predicted to dip 1% to 3%, an improvement from the earlier guidance of 3% to 5%. The company maintained its expectation to reach a gross savings target of $750 million by the end of 2025.
Leadership Moves: Recent leadership changes at Hasbro include naming John Hight president of Wizards of the Coast and Digital Gaming, replacing Cynthia Williams who resigned in April. Earlier this month, Hasbro appointed Dan Shull as chief digital information officer and Stephanie Beal as chief supply chain officer.
Prospects: Hasbro's pivot towards digital gaming and entertainment partnerships, such as Disney, Marvel, and Star Wars IPs, highlights its strategic direction, seeking to capitalize on emerging growth areas while addressing traditional retail pressures. A potential bid for Mattel could reshape the competition, potentially bolstering Hasbro's growth and market position. Keep an eye on this developing story! 💥🚀✨🎯
- Hasbro's CEO, Chris Cocks, highlighted the importance of digital growth for the company and the industry, stating it is a key part of their plans for growth.
- During the earnings call, Cocks mentioned that over 60% of Hasbro's revenue comes from consumers aged 13 and up, a group known in the industry as "kidults."
- As rival Mattel reported Q2 net sales slipping and kept quiet about potential private equity interest, there have been rumors of a potential Hasbro offer.
- In line with their strategic direction, Hasbro is pivoting towards digital gaming and entertainment partnerships, including collaborations with Disney, Marvel, and Star Wars IPs, to capitalize on emerging growth areas.
