Hasbro will release their Q4/2022 and full year 2022 results on February 16th, but preliminary results were released by the toy company earlier today. And the results are not pretty. As a reaction to the bad numbers Hasbro also announced that they will lay off roughly 15% of their global workforce in 2023, about 1,000 people. So how bad are things? Really bad! Click through for more!
As mentioned in an earlier article by me external analysts believe that Hasbro had a very weak Q4/2022 – much weaker than any of their competition – and that both the Marvel and Star Wars toy lines seem to look “tired”. These analysts do have access to data from companies such as the NPD Group who monitor things like toy sales in several key markets. So they are not just guessing. And it turns out that analysis was spot on, since Hasbro’s premimary report confirms basically all of it. 2022 was a terrible year for the company and the holiday season was downright sad.
This is what Hasbro CEO Chris Cocks had to say about the preliminary results:
Despite strong growth in Wizards of the Coast and Digital Gaming, Hasbro Pulse, and our licensing business, our Consumer Products business underperformed in the fourth quarter against the backdrop of a challenging holiday consumer environment.
How bad are things exactly?
Revenue in Q4/2022 is down by 17% compared to Q4/2021, this after an already very disappointing Q3/2022 with a revenue decline of 15%. Revenue for the full year is down by 9% compared to 2021. Q4/2022 is now the second quarter in a row with a huge revenue decline.
To give you an idea about the competition, while Mattel also announced that the holiday season would be challenging because of inflation, Mattel is expected to report revenue growth of 8-10% for the full year.
Hasbro’s consumer products segment revenue in Q4/2022 (basically the toys, including board games, action figures, Nerf, etc) is down by a massive 26% compared to Q4/2021. Holiday sales were just abysmal for the company. Consumer products revenue is down by 10% for the full year. And this despite price hikes of up to 30% for things like action figures. That tells you that unit sales declined even more, since higher prices did offset some of the lower unit sales. If you have 26% lower revenue in Q4 even though your prices have gone up by up to 30% you sold MUCH less than before.
Wizards of the Coast (Magic The Gathering, Dungeons & Dragons) saw some growth, but this was before the spectacular blunder by Hasbro in early January when Hasbro tried to monetize Dungeons & Dragons a lot more by introducing a new Open Game License that included royalty payments of up to 25% to Hasbro. After a lot of uproar in the D&D community Hasbro tried to backpedal but it seems lasting damage was done to the D&D brand and we have to see how Wizards of the Coast will fare in Q1/2023. WoTC, so far, was booming for Hasbro, let’s see how things will develop after the D&D disaster that left a bad taste in the mouth of the entire community.
To still reach Chris Cocks’ overly ambitious operating profit and margin goals (Cocks wants a profit margin of 20% by 2027 and increase profits by 50% until 2025) the Pawtucket toy maker does what any other company does in a situation like this, they follow the usual playbook: Hasbro will lay off people. 15% is quite a sizable portion of the global workforce.
Maybe raising prices up to 30% is not a good idea after all in times of higher costs of living where people think twice before they purchase something they don’t really need. Who would have thought that people will just buy much less of your product if they feel it’s no longer a good value and much too expensive? And as usual the employees are the ones who bear the brunt of all the the bad management decisions, Hasbro raises prices well above what inflation would require, consumers stop buying your products because the toys have become too expensive and they already have all the Monopoly editions they need at home, to the surprise of no one revenue and profit subsequently decline, cost cutting is the usual panacea… and in turn employees are let go to somehow salvage the lofty management goals.
What about this… Chris Cocks admits he fumbled the ball and fires himself. That will not ease the pain of those 15% who will be let go soon, but at least it would mean the CEO would take responsibility for his decisions. Let’s see what the shareholders have to say about Hasbro’s financial results in 2022.
Instead it seems it’s full steam ahead on the current course for Hasbro. This is what Chris Cocks also had to say:
We are focused on implementing transformational changes aimed at substantially reducing costs and increasing our growth rates and profitability. While the full-year 2022, and particularly the fourth quarter, represented a challenging moment for Hasbro, we are confident in our Blueprint 2.0 strategy, unveiled in October, which includes a focus on fewer, bigger brands; gaming; digital; and our rapidly growing direct to consumer and licensing businesses. Through this strategy, we are putting the consumer at the center of everything we do, and our Operational Excellence program is on track to drive significant cost savings across the business and improve our overall competitiveness. These strategic pillars helped to improve our results, particularly operating profit margin and revenue growth in key categories, in a challenging fourth quarter, and lay the groundwork for continued progress in 2023.
People who play corporate Bingo probably won several prizes after reading this quote.
Now we have to wait for February 16th and the full results, the earnings call where Chris Cocks and Co. answer questions will certainly be of interest. We will keep you posted!
Addendum: here is a chart of Hasbro’s stock price since January 2021. Do you see a trend here? As of now stock price is basically just 50% of what it used to be only one year ago But everything is fine! Nothing to see here! Move along, move along and please buy a $35 Boba Fett figure and $1000 Magic: The Gathering 30th anniversary booster packs (this is not a joke, this is a real thing), thank you!
Category: Hasbro, Toy Industry News
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