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Hasbro (HAS) Bets on E-commerce Amid Soft Entertainment Sales

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Hasbro, Inc. HAS is benefiting from solid growth in e-commerce revenues, increased focus on eOne content and solid momentum in the toy and game market. However, dismal entertainment segment performance and coronavirus woes remain concerns.

E-Commerce Fuels Growth

By leveraging its global retail network along with investments in new channels, Hasbro witnessed solid growth in its e-com revenues in 2020. Notably, the team drove more than $1 billion in e-com revenues, reflecting an improvement of 43% year over year. It also contributed nearly 30% to global revenues in 2020. Going forward, the company continues to focus on retailers to expand their online offerings. The company’s Digital Gaming and Entertainment revenues witnessed robust growth in first-quarter 2021.

Increased Focus on eOne Content

Hasbro continues to focus on adapting plans to deliver robust lineup of entertainment and innovation from E1 and its partners in 2021. Notably, on the content side, E1 production is gradually recovering through a new animated series on Netflix and Alien TV. The team also continues to develop and produce new content for Peppa Pig, PJ Mask and the My Little Pony 2021 feature film.

With live-action TV and film production limited, cash spend in 2020 amounted to $439 million. The company’s War for Cybertron content in partnership with Netflix drove first-quarter 2021 performance. The company further announced that War for Cybertron Chapter Three will be airing this summer. Moreover, in partnership with Paramount, the next feature in the theatrical TRANSFORMERS franchise is scheduled for 2022. Notably, cash spend on content across scripted and unscripted live action, animated TV, and film is estimated in the range of $675 million to $750 million for 2021. In first-quarter 2021, the company spent nearly $147 million.

Other Growth Drivers

Hasbro, which shares space with Mattel, Inc. MAT, JAKKS Pacific, Inc. JAKK and Take-Two Interactive Software, Inc. TTWO, is witnessing strong gaming demand during the coronavirus pandemic. The company’s gaming category, which includes MAGIC: THE GATHERING tabletop, MONOPOLY, DUNGEONS AND DRAGONS and many other Hasbro games such as THE GAME OF LIFE, JENGA, CONNECT 4 and OPERATION, is performing well. During the first quarter, the company not only witnessed solid momentum in the toy and game market but also recorded fastest point-of-sale growth in the United States. Despite the pandemic, the company continues to witness robust demand in gaming and point of sale more than 30% higher than 2019 pre-COVID levels.

In addition to growing brands and leveraging opportunistic toy lines and licenses, the company seeks to grow its international business by expanding into emerging markets in Eastern Europe, Asia and Latin and South America. During first-quarter 2021, markets in Europe, North America and Latin America witnessed solid growth. Over the next few years, Hasbro anticipates emerging markets to grow in double digits backed by innovation in products, entertainment and market share gains. Moreover, the company reinforced its five-year plan (2018 to 2023-24) to double its Wizards business.

Headwinds

Dismal entertainment sales remain a concern for the company. During the first quarter, Entertainment segment fell 32% year over year to $218.7 million. The decline was primarily due to the TV and film business. The dismal performance might persist in second-quarter 2021 due to the coronavirus pandemic.

The coronavirus pandemic may continue to hurt every aspect of business from shipments to brick-and-mortar sales to delivery of content in order to meet demand. This along with temporary store closures, product shortages, lower retail inventories, supply chain disruption, limited live-action productions and changing theatrical release schedules are likely to hurt results.

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Mattel, Inc. (MAT) : Free Stock Analysis Report
 
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