Hasbro (HAS) expects price increases to offset higher input costs in coming quarters

Shares of Hasbro Inc. (NASDAQ: HAS) gained 5% on Tuesday, despite the company delivering mixed results for the first quarter of 2022. While revenue beat estimates, earnings fell short of expectations. On the bright side, the company raised its profit guidance for the full year.

Quarterly performance

Hasbro’s net revenues for Q1 2022 increased 4% year-over-year to $1.16 billion, coming ahead of projections. Excluding the impact of foreign exchange, revenue growth was 6%. GAAP earnings decreased 47% to $61.2 million, or $0.44 per share. Adjusted EPS declined 43% YoY to $0.57, missing estimates.

Segment performance and trends

Hasbro delivered revenue growth across all its business segments. Consumer Products grew revenues by 3%, driven by My Little Pony, Peppa Pig, and Hasbro products for the Marvel portfolio and Star Wars. Revenue growth in North America and Latin America helped offset declines in Europe and Asia Pacific.  

The Consumer Products division was hurt by supply chain disruptions, which affected product availability, and by higher freight and inventory costs. All these factors led to a decline in operating profit. Price increases went into effect at the start of the second quarter and this will help offset higher input and freight costs in the coming quarters. For the full year of 2022, revenues in this segment are expected to grow in the low single digits.

Revenues in the Wizards of the Coast and Digital Gaming segment increased 9%, helped by a 10% growth in tabletop revenues and a 6% increase in digital and licensed gaming. Tabletop revenues were driven by strength in Kamigawa and Dungeons & Dragons.  

Gaming presents a massive growth opportunity for Hasbro. In 2021, games was a $2.1 billion business for the company, growing 19% year-over-year. Last week, Hasbro struck a deal with Fandom to acquire D&D Beyond, the premier digital content platform for Dungeons & Dragons. This transaction will bring nearly 10 million connected gaming accounts and a highly profitable, fast-growing business under the Hasbro umbrella.

Another growth area is multi-generational play. The company sees significant growth opportunity in gaming, collectibles and the fan economy. For full-year 2022, Hasbro expects revenue growth in the Wizards division to be at the upper end of the previously communicated growth range of mid-single digits with a potential to reach low-double digits.

Revenues in the Entertainment segment rose 4%. Film and TV revenues grew 14%, driven by deliveries of TV shows like The Rookie and Graymail and films like Deepwater. Family Brands revenues rose 23%. Hasbro expects to see revenue growth in the mid-single digits for this division in FY2022.  

Outlook

Hasbro expects to see low single digit revenue growth in 2022. The company raised its guidance for operating profit and now expects growth in the mid-single digits versus the prior outlook of low single digit growth. Adjusted operating profit margin is expected to be 16% while operating cash flow is estimated to range between $700-800 million.

Click here to read the full transcript of Hasbro’s Q1 2022 earnings conference call