Consumer Discretionary
Leisure
$7.94B
6K
Hasbro, Inc., together with its subsidiaries, operates as a toy and game company in the United States, Europe, Canada, Mexico, Latin America, Australia, China, and Hong Kong. The company operates through Consumer Products; Wizards of the Coast and Digital Gaming; Entertainment; and Corporate and Other segments. The Consumer Products segment engages in the sourcing, marketing, and sale of toy and game products. This segment also promotes its brands through the out-licensing of trademarks, characters, and other brand and intellectual property rights to third parties through the sale of branded consumer products, such as toys and apparel. Its toys and games include action figures, arts and crafts and creative play products, dolls, play sets, preschool toys, plush products, sports action blasters and accessories, vehicles and toy-related specialty products, games, and other consumer products; and licensed products, such as apparel, publishing products, home goods and electronics, and toy products. The Wizards of the Coast and Digital Gaming segment engages in the promotion of its brands through the development of trading cards, role-playing, and digital game experiences based on Hasbro and Wizards of the Coast games. The Entertainment segment engages in the development, production, and sale of entertainment content, including film, television, children’s programming, digital content, and live entertainment. The company sells its products to retailers, distributors, wholesalers, discount stores, specialty hobby stores, drug stores, mail order houses, catalog stores, department stores, and other traditional retailers, as well as e-commerce retailers; and directly to customers through its e-commerce websites under the MAGIC: THE GATHERING, Hasbro Gaming, PLAY-DOH, NERF, TRANSFORMERS, DUNGEONS & DRAGONS, PEPPA PIG, and other brand names. Hasbro, Inc. was founded in 1923 and is headquartered in Pawtucket, Rhode Island.
Key insights and themes extracted from this filing
Net revenues declined to $5,003.3 million from $5,856.7 million in 2022, reflecting strategic decisions to focus on fewer brands and stronger market headwinds in the Consumer Products business. This decrease includes a favorable foreign currency translation of $20.6 million.
The company reported operating losses of $1,538.8 million, or 30.8% of net revenues, compared to an operating profit of $407.7 million in 2022. This decline was significantly impacted by non-cash goodwill and asset impairment charges of $1,307.2 million, primarily within the Entertainment segment.
Net losses attributable to Hasbro, Inc. were $1,489.3 million in 2023, or $10.73 per diluted share, compared to net earnings of $203.5 million, or $1.46 per diluted share in 2022. This reflects the impact of strategic realignments and related charges.
The company continued focusing efforts on fewer, bigger, and more profitable brands in 2023, exemplified by the success of MAGIC: THE GATHERING and DUNGEONS & DRAGONS. This strategy aims to improve efficiency and profitability.
The sale of the Entertainment One film and television business to Lionsgate was completed for $375.0 million in cash, used to reduce outstanding debt. This divestiture reflects a strategic decision to focus on core Hasbro IP and Family Brands.
The Hasbro Transformation Office (HTO) was launched in late 2022 to improve business through cost savings, supply chain transformation, and restructuring actions. This initiative aims to drive long-term, sustainable growth.
Gina Goetter was appointed as Chief Financial Officer and Tim Kilpin as President, Toys, Licensing & Entertainment, bringing industry experience to Hasbro's leadership team. These appointments aim to strengthen leadership and drive strategic execution.
Approximately 1,000 positions were eliminated in January 2023, followed by additional headcount reductions announced in December 2023. These actions reflect efforts to streamline operations and position the business for future growth.
A multi-year initiative was launched in late 2022 to transform the global supply chain, aiming for competitive advantages through performance efficiency and operating model integration. This initiative is aligned with the Operational Excellence pillar.
The 10-K states that the company's business will suffer if they are not successful in executing their strategy and transformation initiatives. The company's ability to successfully implement and execute these plans and initiatives in a timely basis, if at all, is dependent on many factors.
The 10-K states that consumer interests change rapidly and acceptance of products and entertainment offerings are influenced by outside factors, making it difficult to design and develop innovative products, play patterns and entertainment offerings which are and will continue to be popular with children, families and audiences.
The 10-K states that all the company's products are manufactured by third-party manufacturers, the majority of which are in China, with a significant amount of product sourcing also coming from manufacturers the U.S., Vietnam and a lesser amount from India. Should changes be necessary, our external sources of manufacturing can be shifted, over a significant period of time, to alternative sources of supply.
Hasbro operates in a highly competitive industry, competing with large toy and game companies, digital gaming developers, and content providers. Success depends on meeting consumer preferences and providing quality products and experiences.
The entertainment business faces global competition from major film studios and independent distributors, requiring aggressive pricing and potentially lower profit margins.
The company relies on licenses from other parties for some of its products. If the licensed material has less market appeal than expected, or if licenses are not renewed, the business results may be harmed.
A multi-year initiative is underway to transform the global supply chain, aiming for competitive advantages through performance efficiency and operating model integration. This includes refining all aspects of the supply chain.
A significant portion of revenue depends on a small customer base, with Walmart and Amazon accounting for approximately 22% of consolidated net revenues. Economic difficulties or changes in purchasing patterns of these major customers could significantly impact the company.
The business is highly seasonal, with a majority of retail sales occurring from September through December. This requires significant working capital and accurate forecasting to manage inventory effectively.
Continued digital game development is a key growth factor for the future, including AAA games, games as a service and licensed games. If we are unable to continue to grow this business and ensure its integration with our other business segments, our business may be harmed.
The entertainment industry continues to experience frequent change driven by technological development and audience viewing preferences. The company must adapt to these changes or its business could be harmed.
The company faces increasing cybersecurity threats and maintains systems and processes to protect data. Failure to successfully operate information technology systems or a data breach could harm the business.
Proceeds from the sale of the eOne Film and TV business were primarily used to reduce outstanding debt, reflecting a commitment to deleveraging the balance sheet.
The company declared a dividend of $0.70 per share, demonstrating a commitment to returning capital to shareholders despite the reported losses.
A share repurchase program remains authorized, but no repurchases were made during 2023, indicating a shift in capital allocation priorities towards debt reduction and strategic investments.
The Science-Based Targets Initiative (SBTi) validated the company's greenhouse gas emissions reduction targets, demonstrating a commitment to environmental sustainability.
The company continues to purchase Renewable Energy Certificates (RECs) to cover electricity consumption in markets where available, supporting renewable energy development.
The Human Rights and Ethical Sourcing program ensures compliance with Hasbro's Global Business Ethics Principles in the supply chain, focusing on fair and safe working conditions.
Adverse economic conditions, such as inflation and recessions, can negatively impact consumer spending on discretionary products and entertainment.
Political instability and civil unrest, such as the conflict between Russia and Ukraine, can disrupt business activities and supply chains.
Compliance with various regulations, including product safety laws and data protection laws, can increase costs and create challenges for the business.