Hasbro's earnings miss by wide margin, issues downbeat outlook

Jay's InsightTuesday, Feb 13, 2024 12:31 pm ET

2min read

Hasbro, the toy maker behind popular brands such as Monopoly, Transformers, and G.I. Joe, reported its financial results for the fourth quarter of 2023, which fell short of analysts' expectations.

Shares fell 10% in reaction to the news. It broke below the 20- and 50-sma which added to the downward momentum. Peer Mattel (MAT) saw some weakness on the news, slipping 2%. HAS is attempting to bounce back as it rallies back to $49. The stock is still down -4% on the session.

The company's adjusted earnings per share (EPS) for the quarter came in at $0.38, which was $0.29 worse than the FactSet Consensus of $0.67. Revenues for the quarter decreased by 23.2% year-over-year to $1.29 billion, compared to the FactSet Consensus of $1.33 billion.

The Consumer Products Segment revenue declined by 25% due to decreased demand for toys, while the Entertainment Segment revenue decreased by 49% primarily due to the impairment charge associated with the eOne Film and TV business. However, the Wizards of the Coast Segment revenue increased by 7% due to growth in licensed digital gaming.

Hasbro's operating loss for the quarter was $1,199 million, which includes the goodwill and intangible asset impairment charges and non-recurring inventory charges. Adjusted operating loss was $50 million. The net loss per diluted share was $7.64, while adjusted net earnings per diluted share were $0.38.

Looking ahead, Hasbro expects its 2024 adjusted EBITDA to be between $925 million and $1 billion. This represents an increase from its previous target of $350 million to $400 million. The company also increased its mid-term gross savings target to $750 million by the end of 2025 from its previous target of $350 million to $400 million.

For the full year, the Consumer Products Segment is expected to experience a 7% to 12% revenue decline, with 4 points of the decline attributed to businesses shifting to an out-license model. The Operating Margin for this segment is expected to be 4% to 6%. The Wizards of the Coast Segment is expected to experience a 3% to 5% revenue decline, primarily due to the second half comp in licensed digital gaming. The Operating Margin for this segment is expected to be 38% to 40%. The Pro-Forma Entertainment segment is expected to experience a $15 million revenue decline, with an adjusted operating margin of approximately 60%.

In summary, Hasbro's Q4 earnings report showed a significant decline in revenue and earnings, primarily due to decreased demand for toys and the impairment charge associated with the eOne Film and TV business. However, the company remains optimistic about its prospects and has increased its mid-term gross savings target. The company's outlook for 2024 is somewhat positive, with expectations of increased adjusted EBITDA and a focus on returning cash to shareholders and paying down debt.

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