After a bumpy 2023, what are Hasbro’s (HAS) plans for 2024?

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Shares of Hasbro, Inc. (NASDAQ: HAS) were up over 2% on Wednesday. The stock has gained 11% over the past three months. The company delivered lackluster results for the fourth quarter of 2023 and provided a cautious outlook for 2024. At the same time, it has been taking steps to reshape its business in order to drive profitable growth over the long term.

Disappointing Q4 results

Hasbro’s top and bottom line numbers declined year-over-year and missed expectations. Revenues decreased 23% to $1.3 billion in Q4 2023. The company reported a net loss of $1.06 billion, or $7.64 per share, on a GAAP basis. Adjusted EPS fell 71% to $0.38.

The toymaker witnessed double-digit revenue declines in its Consumer Products and Entertainment segments during the fourth quarter, which more than offset a 7% growth in the Wizards of the Coast and Digital Gaming segment. The decline in Consumer Products revenue was caused by planned business exits, broader category declines, and a step-up in inventory clearance. Hasbro also recorded revenue declines across all its geographies and its brand portfolio during the fourth quarter.

Hasbro Q4 2023 Earnings Infographic

2024 Plans

As stated on its quarterly conference call, Hasbro believes the toy category will continue to experience headwinds in 2024. There still remains a lot of older discounted inventory in the market across the industry, the consumer is still value-conscious, and a reduced box office slate is not likely to provide much of a tailwind to entertainment. Against this backdrop, the company has been focusing on shaping up its cost structure and inventory position.

In 2024, Hasbro will continue its strategy of Fewer, Bigger, Better. This involves focusing on fewer SKUs that drive higher impact, bigger investment in winning brands, and better innovation. As part of these efforts, the company has eliminated about half of its SKUs, which were unprofitable and uneconomical. In addition, it moved some of its brands to an out-licensed model with an aim to drive operating profit.

During 2024, Hasbro plans to focus on brands such as FURBY, TRANSFORMERS, and PLAY-DOH. It is also collaborating with Walt Disney for action figures based on Marvel Superheroes and Star Wars. Board games is another category that is expected to see growth in 2024.

Hasbro managed to reduce its inventory levels by over 50% in 2023 compared to the previous year and it anticipates owned inventory levels to remain relatively flat in 2024. The company has also raised its gross cost savings target through 2025 to $750 million from the previous range of $350-400 million.

Outlook

Hasbro has forecasted revenue declines across all its segments in 2024. Revenues in the Wizards of the Coast segment are expected to be down 3-5% as the company laps the strong growth achieved in 2023 with the launch of Baldur’s Gate III and the MAGIC: Lord of the Rings set. Revenue is expected to grow in the first half of the year with the decline coming in the latter half as it comps the big launches.

Consumer Products revenues are projected to be down 7-12% in 2024, with half of the decline coming from measures such as planned business exits and a reduction in unprofitable close-out revenue, which were undertaken in order to improve profitability. The company expects revenues to decline steeply in the first two quarters and then stabilize during the back half of the year. Revenues in the Entertainment segment are expected to be down $15 million compared to last year.

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