Hasbro Reports Q2 Earnings Drop; Shares Fall 7%

Hasbro Inc. (HAS) has reported its adjusted second-quarter earnings on July 27, with revenue dropping 29% year-over-year. Shares fell 7% in Monday’s trading.

The toymaker stated that its business segments were negatively impacted due to the pandemic, which caused lower retail inventory, product shortages, and store closures. Hasbro reported a net loss of $33.9 million or 25 cents per share compared to last year’s profit of $13.4 million or 11 cents per share. Additionally, revenue decreased to $860.3 million, which was short of analyst estimates of $922 million.

Global game and toy revenue accounted for 30% of online sales with an increase of 11% in its gaming segment. In the later part of the quarter, the company reported that sales lifted as stores began to reopen, saying that it saw improvement into July. Hasbro said nearly all of its warehouses and partner factories are now open.

Hasbro CEO Brian Goldner said on July 27, “The second quarter was much as we expected: strong point of sale for Hasbro brands countered by a very challenging revenue period due to global closures in our supply chain, across retailers as well as in entertainment production.” He added, “We have a strong entertainment lineup for 2021, through internally developed as well as third-party entertainment.”

In light of movie delays, sales of action figures have been slow despite Hasbro’s Marvel and Star Wars toy licenses. Revenue for franchise brands fell 35% to $376.8 million, missing the consensus of $507.6 million. Hasbro’s partner brands revenue also dropped 35% to $138.2 million to miss estimates of $174.2 million. However, Hasbro’s own brands revenue rose 11% to $137.0 million to beat expectations of $125.9 million.

Jefferies analyst Stephanie Wissink noted on June 16 Hasbro’s ambitious lineup for Q3 saying, “Hasbro expects production of live entertainment to restart in July/Aug. MTG Arena is expected to step-up in 2H with a major July pack release, mobile app, and launch in China via Tencent. HAS supported its Wizards Play Network of 8K hobby shops during the crisis by offering unique card pack releases to sell at no cost and local online tournaments.” She also commented on Hasbro’s 2019 acquisition of Entertainment One (eOne), saying, “If we assume revenue synergies from eOne add $250-300M (8-10 properties), the model pivot will be well underway.”

As of July 27, the analyst maintains a Buy rating on the shares and a price target of $88, which implies 22% upside potential.

Overall, 5 analysts assign Buy ratings, 4 Hold ratings, and no Sell ratings, giving HAS a Moderate Buy Street consensus. The average analyst price target stands at $88.22, suggesting 23% upside potential, with shares down 26% year-to-date. (See Hasbro’s stock analysis on TipRanks).

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