Hasbro (HAS) set to begin FY2021 with new structure and strategy

Hasbro Inc.’s (NASDAQ: HAS) stock has gained over 19% in the past 12 months. The company faced headwinds in 2020 from the COVID-19 pandemic as shutdowns in manufacturing, retail and live-entertainment caused an 8% drop in full-year revenues. However, the toymaker saw strength in other parts of its business such as ecommerce and gaming, registering double-digit growth in these areas.

At its investor event on Thursday, Hasbro disclosed its new segment structure and outlined its strategic growth drivers for the near and medium term. This new structure will help the company focus on more profitable areas and drive growth, and will come into effect from the first quarter of 2021. The new reporting segments are Consumer Products, Wizards of the Coast and Digital Gaming, and Entertainment.

Consumer Products

This segment includes Hasbro’s toys and games as well as all licensed consumer products. In 2020, revenues for this division amounted to $3.64 billion, which was down 9% from 2019. The company sees potential for its brands in the preschool market and is working on new product launches in this space. Hasbro will roll out product lines for PEPPA PIG and PJ MASKS in the second half of 2021.

Hasbro expects revenue in this segment to grow at or above the industry growth rate, with a mid-single digit growth target for 2021. Operating profit growth is expected to surpass that of revenue over the medium term, which will help return the segment to low-teens operating profit margin over the period. Hasbro is also working on getting 50% of its consumer products business on ecommerce by 2025.

Wizards of the Coast and Digital Gaming

This segment will include revenues from Wizards of the Coast tabletop and digital games, including MAGIC: THE GATHERING and DUNGEONS & DRAGONS, as well as licensed Hasbro digital gaming. In 2020, revenues in this division grew 19% year-over-year to $906.7 million.

Gaming, in general, witnessed growth during the pandemic in 2020. Hasbro saw its gaming revenue increase 15% during the year. Digital gaming licensing revenue rose 17% in 2020. The company has invested around $210 million in digital games development over the past five years and currently has over a dozen games in development. This is a key area of focus for Hasbro and the toymaker has plans to invest several hundred million more in digital game development over the medium term.

Wizards of the Coast generated revenues of $816 million during the year, with growth of 23% and 33% in MAGIC: THE GATHERING and DUNGEONS & DRAGONS respectively. Hasbro stated that Wizards of the Coast is almost halfway to achieving its target of doubling its revenue from 2018 to 2023. The company has several new game launches coming up over 2021 and 2022.

Entertainment

This division will include revenues from Hasbro and eOne entertainment across family brands, TV and film, and music. In 2020, revenues in this unit fell 22% YoY to $909 million. The company has over 200 projects underway with 30 plus Hasbro brands in development across TV and feature films. Hasbro expects 2-3 major motion pictures and 3-4 TV shows on major platforms for its brands by 2022 to 2023.

Click here to read the full transcript of Hasbro’s Q4 2020 earnings conference call