Hasbro (HAS) expects low single-digit decline in revenue in FY2023

Shares of Hasbro Inc. (NASDAQ: HAS) were up over 2% on Thursday following the announcement of its fourth quarter 2022 earnings results. Earnings beat expectations while revenue came in line with projections. However the company expects revenue to decline in 2023 due to a challenging environment in the toy and game market.

Quarterly numbers  

In Q4 2022, Hasbro’s revenue declined 17% year-over-year to $1.68 billion, in line with the consensus target. Adjusted EPS grew 8% to $1.31, surpassing projections of $1.29. On a GAAP basis, the company reported a net loss of $0.93 per share, compared to EPS of $0.59 in the year-ago quarter.

Category performance

In the fourth quarter of 2022, Hasbro saw revenues decline in the Consumer Products and Entertainment segments by 26% and 12% respectively. Revenues in the Wizards of the Coast and Digital Gaming division increased 22%.

MAGIC: THE GATHERING saw revenue grow 40% in the quarter due to strong initial orders of Domanaria Remastered and reorders of Warhammer 40,000. Tabletop revenue grew 40% to $267 million.

Within Consumer Products, revenues declined across all geographic regions with North America falling 30% followed by Europe at 27%. The Asia-Pacific and Latin America regions saw single-digit revenue declines. In the Entertainment division, revenues declined due to decreased film and unscripted TV deliveries in Q4 2022. Film and TV revenue declined 10% while Family Brands revenue was down 28%.

In Q4, Hasbro recorded revenue declines across its entire brand portfolio with Partner Brands and Emerging Brands both down 30% YoY. Hasbro Gaming revenue declined 8% while total gaming revenue rose 5% in the quarter to $582 million. Franchise Brands were down 12%.

In FY2023, Hasbro expects revenue in Consumer Products to decline mid-single digits from last year while revenue in the Entertainment segment is expected to increase in the low single digits. Revenue in Wizards of the Coast and Digital Gaming is expected to grow in mid-single digits.

Outlook

Hasbro anticipates a challenging consumer discretionary environment in FY2023. This, along with an expected flat to declining toy and game market, has led the company to guide for a low single digit decline in revenue for the year. Adjusted EPS is expected to range between $4.45-4.55.

Based on its progress in implementing Blueprint 2.0, Hasbro outlined its medium to long-term targets. The company expects a mid-single digit revenue CAGR through 2027 along with a high single digit operating profit CAGR to achieve 20% adjusted operating profit margin by full-year 2027. The toymaker also expects to generate $250-300 million in annualized run-rate cost savings by year-end 2025.

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