Hasbro Sees Significant Inventory Decline But Focused on Growth

Hasbro Reports Decline in Third-Quarter Sales

Hasbro Inc. (NASDAQ: HAS), known for its popular Monopoly game, has recently disclosed a challenging third-quarter sales report. In the latest round of earnings, Hasbro's revenue recorded a substantial decline of 15% year-over-year, amounting to $1.281 billion. This performance slightly fell short of the analyst consensus estimate of $1.295 billion.

Factors Influencing Revenue Trends

The significant drop in revenue primarily stemmed from the eOne film divestiture. When excluding this factor, Hasbro's revenues still fell by approximately 9%. The company's performance in consumer products also contributed to this downward trend.

Consumer Products and Other Segments Performance

In terms of segment revenues, Hasbro's Consumer Products division saw a decrease of 10%. This decline was attributed to the exit of certain brands, fewer closeout deals, and lower-than-expected sales volume. However, partial offsets were seen thanks to innovative new product introductions and robust licensing agreements within consumer products.

Wizards of the Coast and Digital Gaming Dynamics

The Wizards of the Coast and Digital Gaming segment also presented a mixed picture, with revenue sliding 5%. Although there was notable growth from MAGIC: THE GATHERING, this was counterbalanced by anticipated declines in licensed and digital gaming, largely due to the launch of Baldur's Gate 3.

Entertainment and Financial Performance Overview

Entertainment segment revenues experienced a staggering drop of 86%, a direct consequence of the eOne sale; without this influence, the revenue decline would have been approximately 17%. Nonetheless, operational efficiency showed improvement, with selling, distribution, and administration costs down by 15%. Consequently, Hasbro achieved a considerable positive shift in their operating margin, which advanced from a negative (11.3)% to 23.6%. Operating income for the quarter rose impressively to $301.9 million, contrasting sharply with a loss of $169.5 million in the previous year.

Impressive Adjusted Earnings and Cash Flow

In addition, Hasbro reported an adjusted EBITDA of $406.4 million, with an adjusted earnings per share of $1.73, surpassing analysts' consensus of $1.28. As of the end of September, Hasbro maintained a solid cash position with $1.19 billion in cash and cash equivalents, and the operating cash flow for the nine-month period totalled $587.6 million.

Inventory and Cash Dividend Update

In line with these financial disclosures, Hasbro noted a striking 39% drop in owned inventory compared to the previous year, including a 40% decline in consumer product inventory. The company has declared a quarterly cash dividend of $0.70 per common share, set to be paid on December 4, for shareholders who remain on record by November 20.

Management Outlook and Future Projections

The Chief Financial Officer, Gina Goetter, emphasized the company's ongoing commitment to executing its turnaround strategy, expressing optimism about concluding the year with improved profitability, cash flow, and rigorous operational processes. Looking ahead, Hasbro revised its fiscal 2024 Consumer Products Segment revenue outlook, now projecting a decline between 12% to 14%. They reiterated their adjusted EBITDA guidance in the range of $975 million to $1.025 billion and aim for gross savings of $750 million by the end of 2025.

Market Reaction

In premarket trading, Hasbro's stock (HAS) showed a slight decline of 0.16%, positioned at $70.22.

Frequently Asked Questions

What was Hasbro's reported revenue for the third quarter?

Hasbro reported a revenue of $1.281 billion for the third quarter, marking a decline of 15% year-over-year.

How did the eOne divestiture affect Hasbro's revenue?

The eOne divestiture led to a significant drop in revenue; without it, revenues still declined by about 9%.

What is Hasbro's current inventory situation?

Hasbro's inventory has decreased by 39% compared to the previous year, including a 40% drop in Consumer Products inventory.

When will Hasbro pay its quarterly cash dividend?

Hasbro's quarterly cash dividend of $0.70 is set to be paid on December 4 for shareholders recorded by November 20.

What is Hasbro's outlook for fiscal 2024?

Hasbro revised its fiscal 2024 Consumer Products Segment revenue outlook to a decline of 12% to 14%, while maintaining an adjusted EBITDA guidance of $975 million to $1.025 billion.

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