Hasbro Inc (HAS) Faces Headwinds Amid Transformation: A 2023 Earnings Overview
Revenue: Full year revenue declined by 15%, with a 23% drop in Q4.
Operating Loss: Reported an operating loss of $1,539 million due to significant impairment charges.
Net Earnings: A net loss of $10.73 per share was reported, with adjusted net earnings of $2.51 per diluted share.
Inventory Reduction: Owned inventory reduced by 51%, including a 56% decline in Consumer Products inventory.
Debt Reduction: Reduced debt by $506 million and paid $388 million in cash dividends to shareholders.
2024 Outlook: Expects improved financial performance with a focus on profit growth and momentum in innovation.
On February 13, 2024, Hasbro Inc (NASDAQ:HAS) released its 8-K filing, detailing the financial results for the fourth quarter and full year of 2023. The company, known for its iconic toy and game brands such as Transformers, Nerf, and Magic: The Gathering, faced a challenging year marked by a macroeconomic backdrop that led to a revenue decline and significant operating losses.
Company Overview
Hasbro is a global play and entertainment company committed to creating the world's best play experiences. From toys and games to television programming, motion pictures, digital gaming, and consumer products, Hasbro connects with its audience through its vast portfolio of iconic brands. The company's strategic acquisitions, including Entertainment One (eOne) in 2019 and the tie-up with Dungeons & Dragons Beyond in 2022, have expanded its reach and bolstered its position in the entertainment industry.
Financial Performance and Challenges
The full year 2023 saw Hasbro's revenue decline by 15%, with the Wizards of the Coast and Digital Gaming segment's growth of 10% unable to offset the declines in the Consumer Products segment (19%) and Entertainment segment (31%). The operating loss of $1,539 million included $1.3 billion of non-cash goodwill and intangible asset impairment charges related to eOne film and TV. Adjusted operating profit stood at $477 million with an adjusted operating margin of 9.5%, inclusive of non-recurring inventory costs.
Hasbro's net loss was reported at $10.73 per share, with adjusted net earnings of $2.51 per diluted share. The company achieved approximately $220 million of gross savings as part of its Operational Excellence program and reduced owned inventory by 51%. The sale of the eOne Film and TV business to Lionsgate in December 2023 was a significant move, alongside paying $388 million in cash dividends to shareholders and reducing debt by $506 million. Operating cash flow was positively impacted by working capital improvements, amounting to $726 million.
Segment Details and Outlook
The Consumer Products segment's revenue decrease was driven by business exits, category trends, and inventory management, with operating margins negatively impacted by lower revenues and inventory reduction actions. The Wizards of the Coast and Digital Gaming segment saw a revenue increase due to successful launches like Baldur's Gate III and Monopoly Go!, although operating profit marginally declined due to higher royalty costs. The Entertainment segment suffered from lower Film and TV revenue, exacerbated by industry strikes, and a significant operating loss due to goodwill and intangible asset impairment charges.
For 2024, Hasbro anticipates improved financial performance, with a focus on driving significant profit growth across its segments and building momentum in its innovation pipeline. The company expects Consumer Products Segment revenue to be down by 7% to 12%, with operating margins between 4% to 6%. The Wizards of the Coast Segment is projected to see a 3% to 5% decline in revenue, with operating margins between 38% to 40%. The Pro-Forma Entertainment segment is expected to see a revenue decrease of $15 million, with an adjusted operating margin of approximately 60%. The company aims for a total adjusted EBITDA of $925M to $1B and has increased its mid-term gross savings target to $750M by year-end 2025.
"Guided by our strategy of 'Fewer, Bigger, Better,' we had important wins across both toys and games while making progress in our transformation during a challenging 2023," said Chris Cocks, Hasbro chief executive officer. "Our refreshed leadership team is bringing innovative new products to our fans. At the same time, we are taking the necessary actions to transform Hasbro and deliver long-term profitable growth starting with driving significant profit growth across our segments in 2024 and building momentum in our innovation pipeline between now and 2025."
"2023 was a productive year for Hasbro, although not without some challenges," said Gina Goetter, Hasbro chief financial officer. "As we navigated the current environment, we took aggressive steps to optimize our inventory, reset the cost structure, and sharpen our portfolio focus on play with the eOne film and TV divestiture. Taken together, the actions throughout the full year have positioned the company for improved financial performance in 2024 and beyond."
Despite the setbacks, Hasbro remains committed to its strategy and is poised to navigate through the transformation with a healthier balance sheet and a leaner cost structure. The company's focus on operational excellence and strategic investments in its core business, coupled with its commitment to returning cash to shareholders, sets the stage for a potential rebound in the coming year.
For a more detailed breakdown of Hasbro's financial performance and future outlook, investors and interested parties can access the full earnings report and listen to the earnings conference call webcast available on Hasbro's investor relations website.
Explore the complete 8-K earnings release (here) from Hasbro Inc for further details.
This article first appeared on GuruFocus.
