DJ Hasbros Transformation Is Being Assembled -- Analysis
2:56 PM ET 1/27/23 | Dow Jones
By Denny Jacob
Hasbro Inc. is ramping up its transformation, but some assembly is still required.
The toy and entertainment company said Thursday it is cutting about 1,000 jobs, or about 15% of its headcount, and that its chief operating officer is leaving. The company said personnel changes and other measures, including supply-chain investments, put it on track to hit its longer-term cost-cutting goals.
Analysts say the moves show the company is finally getting serious about an overhaul started under new Chief Executive Chris Cocks that includes cutting up to $300 million in annual costs, investing more in properties such as "Dungeons & Dragons" and focusing on fewer brands in its portfolio. "I think any investor that was questioning the speed at which they were going to pivot should not question that anymore," said Andrew Uerkwitz, equity analyst at Jefferies.
Hasbro also issued preliminary fourth-quarter results well below Wall Street's forecasts, with revenue down a greater-than-expected 17%. Shares were down 7.8%, to $58.79, in midday trading Friday.
Analysts weren't surprised by the challenging fourth quarter because retailers were working down inventory and some consumers held off on purchases during the holiday period. But some say the departure of Eric Nyman could leave a void at Hasbro, given his tenure at the company and knowledge of the toy business.
"The COO's departure leads us to question whether 2023 could be a year of significant uncertainty for Hasbro," analysts at UBS said in a note.
Analysts said the results suggest the company's own projections might be too rosy. D.A. Davidson analyst Linda Bolton Weiser said the company had earlier stuck to what she viewed as too-high sales projections.
"This raises questions about what is going on internally in the company that causes them to issue projections that seem too optimistic to outsiders and end up being so way off," she said in a research note. "We think Cocks now has two strikes against him on the credibility front."
Hasbro did have a bright spot in its latest results, with its Wizards of the Coast and Digital Gaming segment posting a 22% increase in revenue from a year earlier, while revenue in its consumer products segment and entertainment segment declined 26% and 12%, respectively.
Hasbro is attempting to pull off a challenging feat by converting to a company that owns intellectual property and makes media content, toys and interactive entertainment based off of it. Mr. Uerkwitz said the transformation would take time and Hasbro has shown few signs that it is paying off yet.
The end result would be a faster-growing, higher-margin and more competitive business. "A patient investor will be rewarded," he said.
Write to Denny Jacob at email@example.com
January 27, 2023 14:56 ET (19:56 GMT)
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