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 decreased to $1.28B from $1.50B YoY, primarily due to the sale of the eOne Film and TV business and broader industry trends. The Entertainment segment experienced an 86% decline, while Consumer Products and Wizards of the Coast also saw revenue decreases.
Operating profit improved to $301.9M from a loss of $169.5M YoY, driven by cost savings initiatives and the absence of significant goodwill impairments recorded in the prior year. Cost of sales also decreased as a percentage of net revenues.
Net earnings were $223.3M compared to a loss of $170.4M YoY. The effective tax rate was 23.1% compared to 20.8% in the prior year, with both periods impacted by discrete tax events including uncertain tax positions.
The company is focusing on fewer, bigger, and better brands, creating efficiencies in the supply chain, improving inventory, and reinvesting in the business. This includes strategic investments in valuable and profitable franchises across games, toys, licensing, and entertainment.
The sale of the eOne Film and TV business significantly impacts revenue comparisons and strategy. The company retains brand-based created content and the capability to develop and produce entertainment related to core Hasbro IP.
The company made the difficult decision to take additional headcount reductions and accelerate organizational structure changes. These actions are aimed at strengthening the foundation and positioning Hasbro for growth.
Cost of sales decreased both in dollars and as a percentage of net revenues, driven by supply chain productivity and cost savings initiatives. Selling, distribution, and administration expenses also decreased due to cost savings initiatives.
Management is focusing strategic investments on the most valuable and profitable franchises across games, toys, licensing and entertainment. This includes initiatives in Consumer Products segment.
Despite the revenue decline, the company has made strong progress towards its ongoing turnaround efforts, achieving an operating profit compared to an operating loss in the prior year.
The filing states that there are no material changes from the risk factors as previously disclosed in the 2023 Form 10-K or in any subsequently filed reports.
The company is exposed to market risks attributable to fluctuations in foreign currency exchange rates primarily as the result of sourcing products priced in U.S. dollars, Hong Kong dollars and Euros while marketing and selling those products in more than twenty currencies.
The impact of inflation on the Company's business operations was significant during the first nine months of 2024 and throughout 2023. The Company monitors the impact of inflation to its business operations on an ongoing basis and may need to implement actions such as price adjustments to mitigate the impact of changes to the rate of inflation in future periods.
The Consumer Products segment net revenues decreased 10% to $860.1 million for the third quarter of 2024 compared to $956.9 million for the third quarter of 2023 primarily driven by broader industry trends, exited businesses, including out-licensing certain brands, shifts in product mix, and reduced closeout sales as a result of last year's inventory clean up initiatives.
Wizards of the Coast and Digital Gaming segment net revenues decreased 4.6% in the third quarter of 2024 to $404.0 million from $423.6 million in the third quarter of 2023. The net revenue decrease in the Wizards of the Coast and Digital Gaming segment during the third quarter of 2024 was primarily attributable to revenue contributions from higher digital licensing of Baldur's Gate 3
Net revenues in the Franchise Brands portfolio decreased $69.4 million in the third quarter of 2024, compared to the third quarter of 2023. The net revenue decrease primarily reflects lower net revenues from NERF and DUNGEONS & DRAGONS products, partially offset by higher net revenues from MONOPOLY GO!, along with MAGIC: THE GATHERING products.
Cost of sales for the third quarter of 2024 was $378.9 million, or 29.6% of net revenues, compared to $494.5 million, or 32.9% of net revenues, for the third quarter of 2023. The Cost of sales decrease in dollars and as a percent of net revenues was driven primarily by lower sales volumes, supply chain productivity, and cost savings initiatives.
Selling, distribution and administration expenses decreased to $299.3 million, or 23.4% of net revenues for the third quarter of 2024, from $352.3 million, or 23.4% of net revenues, for the third quarter of 2023. The decrease in Selling, distribution and administration expenses during the third quarter of 2024 primarily reflects lower administrative expenses due to cost savings initiatives.
During 2022 and 2023, Hasbro implemented its Operational Excellence program ("the Program"), an ongoing enterprise-wide initiative intended to improve our business through programs that include targeted cost-savings, supply chain transformation and certain other restructuring actions designed to drive growth and enhance shareholder value.
Product development expense for the third quarter of 2024 was $76.3 million, or 6.0% of net revenues, compared to $76.7 million, or 5.1% of net revenues, for the third quarter of 2023. The decrease in Product development expense during the third quarter of 2024 was primarily due to the Company's cost savings initiatives, along with phasing of product releases.
The Wizards of the Coast and Digital Gaming business engages in the promotion of the Company's brands through the development of trading card, role-playing and digital game experiences based on Hasbro and Wizards of the Coast games. Additionally, we license certain of our brands to other third-party digital game developers who transform Hasbro brand-based characters and other intellectual properties, into digital gaming experiences.
The net revenue decrease in the Wizards of the Coast and Digital Gaming segment during the third quarter of 2024 was primarily attributable to revenue contributions from higher digital licensing of Baldur's Gate 3, the DUNGEONS & DRAGONS-based role-playing video game released during the third quarter 2023
There were no repurchases of the Company's Common Stock during the nine months ended September 29, 2024. At September 29, 2024, Hasbro had $241.6 million remaining available under its share repurchase authorization.
In May 2024, the Company issued an aggregate of $500.0 million of senior unsecured debt securities that bear a fixed interest rate of 6.05% due 2034 (the "2034 Notes"). It is anticipated that proceeds from the 2034 Notes, along with existing cash, will be utilized to repay the 2024 Notes.
The Company's short-term investments totaled $489.3 million. The proceeds from the 2034 Notes were invested in short-term treasury bills.
For the past decade, we have been consistently recognized for our corporate citizenship, including being named one of the 100 Best Corporate Citizens by 3BL Media.
The Company has estimated a $31.1 million environmental liability related to a previously owned manufacturing facility (environmental liability assumed as part of a historical acquisition), in which the Company is solely responsible for the mitigation and remediation activities.
The Company is committed to responsible sourcing and ethical manufacturing practices throughout its supply chain. The company monitors its supply chain for compliance with its code of conduct and takes steps to address any issues that are identified.
The Consumer Products segment net revenues decreased 10% to $860.1 million for the third quarter of 2024 compared to $956.9 million for the third quarter of 2023 primarily driven by broader industry trends, exited businesses, including out-licensing certain brands, shifts in product mix, and reduced closeout sales as a result of last year's inventory clean up initiatives.
Entertainment segment net revenues decreased 86% to $17.2 million for the third quarter of 2024, compared to $122.9 million for the third quarter of 2023. The net revenue decrease in the Entertainment segment during the third quarter of 2024 was driven by lower net revenues as a result of the sale of the eOne Film and TV business during the fourth quarter of 2023.
Future volatility of general price inflation could affect consumer purchases of our products and spending on entertainment. Additionally, the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead, could adversely affect the Company's financial results.