Hasbro posted gloomy third-quarter earnings on Tuesday morning, which were below analysts’ estimates. This was a result of the effect of inflation on consumers. Also, the company struggled with high inventory levels.
Although toys have historically fared better during economic downturns than other discretionary categories, Hasbro lowered its annual sales prediction earlier this month. Also, it warned that demand was beginning to decline ahead of the holiday season due to persistently high prices.
Meanwhile, as consumers become more cautious about spending their Christmas budgets during a period of decades-high inflation, Hasbro predicted on Tuesday that there will be an increase in promotional activity leading up to the holiday gift-giving season.
In addition, on a post-earnings call, Chief Executive Officer Christian Cocks stated that “promotions and entertainment field demand have become increasingly important and will be key in the quarters ahead.” He also noted that Hasbro’s sales volume increased by mid-double digits from a year ago during Amazon’s recent Prime Day.
However, in the fourth quarter, the business anticipates flat sales growth on a constant currency basis, powered by popular brands including Peppa Pig, My Little Pony, and Marvel’s Black Panther. Moreover, analysts anticipated a drop of about 2%.
Toy demand is still showing signs of being fairly strong, according to Linda Bolton Weiser, an analyst at D.A. Davidson.
Nevertheless, Hasbro saw a 15% decline in net revenue to $1.68 billion in the third quarter that ended on September 25. This was hampered in part by a higher currency.
Refinitiv IBES estimates that analysts had projected the producer of Transformers toys to earn $1.52 per share. But, it marks a 28% decline in adjusted net earnings to $196.2 million, or $1.42 per share.
In early trade, shares of the company that produces “Magic: The Gathering” were down roughly 2%.
The toymaker said it intends to “sell through inventory” in the fourth quarter as it tries to stick to its strategy of concentrating on fewer, bigger brands and more licensing. The holidays are quickly approaching.
