Hasbro Had A Bad Third Quarter, But Star Wars Is Still Doing Fine

Hasbro released their financial report for the 3rd quarter yesterday. And the toymaker failed to meet targets and suffered a major revenue decline. However, not everything is doom and gloom, and when you look at the report in detail you can see that what matters to us most here, Star Wars, is still performing well. Click through for more details!

First a quick look at the numbers: revenue in Q3 2022 is down 15% compared to Q3 2021. 1.6 billion compared to 1.9 billion in 2021.

Operating profit is down by a whopping 47%, you can see here how much Hasbro (like any other company) is affected by rising costs for basically everything (and this is not just something in the US either, the same happens in Europe). Profit in Q3 2022 was 194 million USD, compared to 368 million USD in Q3 2021.

Hasbro partly explains this by retailers ordering more than usual in Q2, anticipating supply chain issues, meaning they ordered less than usual in Q3. Also, major Magic The Gathering content will be released in Q4 this year, whereas in the previous year it was released in Q3. And MTG is a major brand for Hasbro.

However, if you take a closer look at the numbers you can see that not all segments are affected equally. Hasbro’s very own Franchise Brands (-12%), Gaming (-25%) and their Entertainment division (-32%) took the biggest hits.

The ONLY segment that remained more or less stable is: Partner Brands, and that means Star Wars, Marvel and all the other licensed toys. This segment reported a decline of 5%. Now it is of course impossible to say how well each license performed, but Hasbro has this to say about Star Wars in their earnings call, the quote is from the opening remarks of Deb Thomas, Chief Financial Officer of Hasbro:

Hasbro products for Marvel and Star Wars positively contributed to revenue and POS in the quarter. Where we’ve had our most challenging comps are NERF and Hasbro Gaming

POS is “points of sale” btw. meaning an online or brick and mortar shop that actually sells Star Wars toys.

The official presentation says this about Star Wars:

YTD Growth driven by Hasbro products for the Marvel portfolio and Star Wars.

YTD here means “year to date”, so the revenue from January 1st until September 30th. This is basically the same Hasbro said about Star Wars in the previous quarters. The important word here is “growth”.

And when you look at the numbers you will find that indeed, Partner Brands revenue has grown in 2022, despite the small decline in Q3, but for the full year to date the numbers are up by 1%, or 776 million USD vs 767 million USD in 2021. It is this growth the official presentation is talking about. And Star Wars and Marvel are the two licenses mostly responsible for that. Of course higher prices also have an effect here.

COO Eric Nyman had this to say about licenses like Star Wars when he was asked how a license such as Disney Princesses, which is winding down, affected things.

So you’re going to see us with that growth in those Franchise Brands and the Partner Brands that we’re going to stay behind like Star Wars and Marvel. And we’re going to exit some others.

And there you have it. Hasbro will remain committed to Star Wars (no big surprise here), but it seems they are ready to abandon a few other licenses that are not really working out for them. In their official presentation Hasbro say they want to focus on fewer, but bigger brands in the future. And Star Wars will be a part of that strategy.

So all in all Hasbro had a very difficult 3rd quarter in 2022, but Star Wars is still in good shape, so there is no doom and gloom here. Star Wars is doing fine.

Hasbro’s official financial results
Hasbro’s official presentation (PDF)
Earnings call transcript on Motley Fool

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