Hasbro Inc. (HAS) reported a challenging third quarter, with sales declining 15% year-over-year to $1.281 billion. This figure narrowly missed analyst expectations of $1.295 billion. The primary driver behind this decline was the divestiture of the eOne film business. Excluding this divestiture, revenue decreased by 9%.
Despite the revenue dip, Hasbro’s earnings performance exceeded expectations. Adjusted earnings per share came in at $1.73, surpassing the analyst consensus of $1.28. This strong performance was attributed to cost management and operational improvements.
Looking at specific segments, Consumer Products revenue decreased by 10% due to exiting certain brands, reduced closeouts, and softer-than-anticipated volume. However, new product innovation and robust consumer products licensing contributed to offsetting these declines. Wizards of the Coast and Digital Gaming revenue decreased by 5%, with growth in MAGIC: THE GATHERING being offset by anticipated declines in Licensed and Digital Gaming due to the launch of Baldur’s Gate 3 in the third quarter of 2023. Monopoly Go! generated $30 million in revenue, in line with guidance.
The Entertainment segment experienced a significant revenue plunge of 86% due to the impact of the eOne divestiture. Excluding this impact, revenue declined by 17%. Meanwhile, selling, distribution, and administration costs fell by 15%.
On a positive note, Hasbro’s operating margin expanded year-over-year from (11.3)% to 23.6%. The company’s operating income for the quarter reached $301.9 million, a significant improvement from the $169.5 million loss recorded in the previous year. Adjusted EBITDA for the quarter was $406.4 million.
As of September’s end, Hasbro held $1.19 billion in cash and equivalents. Operating cash flow for the nine months totaled $587.6 million. Notably, Hasbro-owned inventory decreased by 39% compared to the previous year, including a 40% decline in Consumer Products inventory from the third quarter of 2023.
Hasbro declared a quarterly cash dividend of $0.70 per common share, payable on December 4th, to shareholders of record at the close of business on November 20th.
Looking ahead, Hasbro revised its fiscal 2024 Consumer Products Segment revenue outlook from down 7%–11% to down 12%–14%. However, the company reiterated its fiscal 2024 adjusted EBITDA guidance of $975 million—$1.025 billion. By the end of 2025, Hasbro aims to achieve gross savings of $750 million.
Gina Goetter, Hasbro’s Chief Financial Officer, highlighted the company’s continued focus on turnaround efforts: “We continue to execute our turnaround efforts and are poised to finish the year with improved profitability, cash flow and operational rigor.”
In premarket trading on Thursday, HAS stock was down 0.16% at $70.22.
Hasbro’s Q3 earnings report demonstrates the company’s efforts to navigate a challenging market environment while maintaining its commitment to long-term growth. The focus on cost control and operational improvements, coupled with the continued execution of its turnaround strategy, suggests a positive outlook for the future.