hasbroThe outlook for 2023 may feel like déjà vu. First off, anyway.
The toymaker announced its fourth-quarter results on Thursday while issuing conservative guidance for the year modest expectations It was then that it entered 2022.
Hasbro is maintaining some optimism though, pointing to major bright spots from releases like Transformers and its growing Wizards of the Coast gaming division, which includes Dungeons & Dragons, along turnaround plan It was announced in October.
Shares remained flat after the market closed on Thursday.
Hasbro forecasts full-year revenue will decline in 2023, but forecasts most of the pressure will be felt in the first half of the year. Hasbro said it expects revenue for the year to decline in the low-single digits, percentage-wise, which missed Wall Street’s expectations. Analysts polled by Refinitiv were forecasting 2.2% revenue growth.
The toy industry as a whole has felt the slump. Mattel had more optimism in 2022 than Hasbro and hoped the holiday season would boost its dipping sales. But despite the belief that the company performed poorly for its fourth quarter in consumer product sales.
CEO Chris Cocke said on a call with analysts that he expects the subdued consumer demand on this year’s sales to continue through the first three quarters of 2023, but he expects it to lighten in the last quarter.
Cox also said on the call that Hasbro is looking to introduce a cheaper alternative product line priced between $20 and $30 to help target the inflation-weary consumer.
In the toy industry, “anything under $30 is doing pretty well. Anything above that is doing pretty poorly,” UBS executive director Arpine Cochrane told CNBC.
Hasbro remains hopeful that new releases such as expansion packs for the Dungeons & Dragons and Magic: The Gathering games will pay off and offset declining product sales. “There’s a lot of entertainment coming in the second quarter, which will have a nice impact on the third and fourth quarters,” Cox said. The company announced Thursday that Magic: The Gathering is on track to become its first billion-dollar brand.
In general, for Wizards of the Coast, Cox said, “You should expect growth in Q1, a decrease in Q2, a significant increase in Q3, and a reasonable increase in Q4,” based on the timing of the game’s new release. .
“To a large extent, it’s going to be determined by the company’s approach to how strong Wizard is,” Cochran told CNBC, noting that the gaming segment was a boon to declining product sales.
“For this company, in terms of making it or breaking it, a strong 2023 is going to be determined by how they recover some of the key brand portfolios led by Nerf,” Kocharian said. Nerf lost some market share in the fourth quarter due to lower-priced competition.
The company, which owns brands such as Peppa Pig and Play-Doh, has delivered several hits in the recent past, prompting it to proceed with caution in 2022.
Hasbro started the year with a loss battle for disney princess licensing rights to your competitor Mattel In January. It also branched out from other brand licenses including Trolls. Then in February, the company adjusted to new leadership, with former CEO Brian Goldner taking over as CEO from interim chief Rich Stoddart. passed away in 2021, The pandemic’s disruption to its film production also meant delaying a key revenue stream that had helped spur a boom in product sales.
All of those factors, plus rising costs, slowing consumer demand, and exiting markets such as Russia, resulted in revenue constraints amounting to about $300 million. Cox said he anticipates most of those hurdles to weigh on revenue for the first two quarters of 2023.
Cochran said he has some doubts about how reliably the company can forecast an uptick in the second half of 2023.
The company reported a disappointing holiday quarter for 2022, which it projected was due to outsized inventory without enough consumer demand to sell. It posted revenue of $1.68 billion, matching Wall Street’s expectations.
“As we previously announced, our fourth quarter and full year 2022 results were below our expectations,” Cox said in a fourth-quarter earnings statement released Thursday. toy maker Cut your workforce by 15% in January in an effort to cut costs amid sluggish performance in its consumer products division.
This is the first full quarter since Hasbro announced its three-year turnaround plan in October. The company had said that it would focus its priorities on the direct consumer segment, licensing and entertainment. The company has set a goalpost to achieve 20% operating profit margin by 2027.