What to expect from Hasbro (HAS) in the coming year

Shares of Hasbro Inc. (NASDAQ: HAS) traded in green on Wednesday. The stock has gained over 13% in the past three months. Like most retailers, the company faced significant challenges in 2020 as the COVID-19 pandemic forced it to close most of its stores which took a toll on revenues.   

On a pro forma basis, Hasbro’s revenues fell 7% in the first quarter of 2020. In Q2, revenues plunged 29% as strong demand for products were hurt by store closures and product shortages. During the third quarter, the revenue decline narrowed to 4% as the company saw growth in the US and Canada, and Europe regions as well as strength in ecommerce.

Hasbro has been benefiting from strength in gaming which has partly helped offset declines from other areas of the business. The company’s alliance with Walt Disney (NYSE: DIS) and its acquisition of eOne which help bring its brands to movies and games are factors that give it an edge over its competitors.

Gaming

Gaming is a significant growth area for Hasbro. In the second quarter of 2020, gaming revenues were up 11% on a pro forma basis while in the third quarter, they rose 3%. In Q3, Hasbro’s total gaming category, including all gaming revenue, rose 21% year-over-year to $543 million. The company saw growth in numerous games properties during Q3.

Hasbro’s broad portfolio as well as its investments in new games have been key factors in driving growth. During the third quarter, core games like MONOPOLY, JENGA and OPERATION witnessed strong growth while strength in digital gaming helped offset declines with the Entertainment, Licensing and Digital segment.

Hasbro continues to invest in digital gaming. The company plans to launch Magic: The Gathering Arena on mobile in 2021 and it has a new digital game for mobile named Spellslingers slated to release next year. Hasbro saw a growth of over 20% in revenues for DUNGEONS AND DRAGONS in Q3 and it continues to ramp up D&D digital.

Ecommerce

Amid the pandemic, Hasbro saw a significant growth in its ecommerce business and the company continues to expand its omnichannel capabilities. In the third quarter, ecommerce grew 50% globally. In the US and Canada segment, ecommerce revenue increased more than 50% while in the International segment, it rose around 40%.

Year-to-date, the company has seen better performance from markets with more developed ecommerce operations compared to markets that rely more on physical stores. Markets like Latin America, which do not have an advanced ecommerce channel, did not fare well during this period and the company expects them to remain challenged for the remainder of the year.

Hasbro generates a large chunk of revenue during the holiday season. Despite the challenges faced this year, the company is likely to see this trend continue as most of its facilities remain functional and its ecommerce channel remains strong.

Click here to read the full transcript of Hasbro’s Q3 2020 earnings conference call