Key takeaways from Hasbro’s (HAS) Q3 2023 earnings report

Shares of Hasbro, Inc. (NASDAQ: HAS) plunged 10% on Thursday after the company delivered disappointing results for the third quarter of 2023 and provided a bleak outlook for the full year. Both the top and bottom line numbers came below expectations and the company continues to anticipate challenges in the toy category. The stock has dropped 19% year-to-date. Here are the key takeaways from the earnings report:

Results miss expectations  

For the third quarter of 2023, Hasbro reported net revenues of $1.50 billion, down 10% from the prior-year period and below expectations. Adjusted EPS increased 15% from last year to $1.64 but missed projections.

Category performance and trends

As stated on its quarterly conference call, Hasbro entered 2023 expecting a low single-digit decline for the toy category. However, market performance has been more challenging than expected. The company said that according to its internal POS system, total point of sale was down 8% through the third quarter.

In Q3, revenues increased 40% in the Wizards of the Coast and Digital Gaming segment, driven by strong growth in Digital and Licensed Gaming revenue fueled by Baldur’s Gate III and Monopoly Go! However, this was not enough to offset revenue declines in the Consumer Products and Entertainment segments.

Revenue decreased 18% in Consumer Products due to soft industry trends and planned business exits. Entertainment revenues fell 42% due to the impact of the writers’ and actors’ strike on film and TV revenue.

Hasbro continues to face headwinds and believes this holiday will be heavily reliant on deals. The toymaker is working on inventory management as well as creating reasonable deals for consumers. It is also picking up on its cost-saving efforts to drive margins.

Bleak outlook

Hasbro now expects total revenue to decline 13-15% in FY2023, mainly due to a softer toy outlook in Consumer Products. The company expects revenue in the Consumer Products segment to be down in the mid-to-high teens. Hasbro anticipates typical holiday order patterns to be impacted as retailers remain cautious on inventory positions.

The toy giant continues to expect high single-digit revenue growth for Wizards of the Coast and Digital Gaming on the back of strong gains from MAGIC: THE GATHERING and digital games. For the Entertainment segment, revenue is expected to decline 25-30%.