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Hasbro Stock Sinks After Q4 Earnings Miss; Company Blames WGA And Actors Strikes For 31% Film And TV Revenue Slide In 2023

Hasbro fell short of Wall Street analysts’ consensus estimate for fourth-quarter earnings, blaming a 31% drop in 2023 entertainment revenue on the WGA and SAG-AFTRA strikes.

The toymaker also disappointed the Street with its 2024 outlook, particularly an expected 7% to 12% drop in consumer products sales, a category that typically accounts for more than half of total revenue. Shares in Hasbro fell 6% to around $48 after the earnings report.

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In recent years, the company has reversed strategic course and taken a big step back from Hollywood. In 2023, it sold eOne to Lionsgate for $375 million in cash plus the assumption of some production financing loans, retaining eOne family properties like Peppa the Pig. Broader financial pressures influenced the move, which valued the film and TV assets well below the $4 billion Hasbro paid to acquire all of eOne in 2019. Last December, Hasbro announced a new round of layoffs, bringing its total 2023 workforce reduction to 20% (around 1,900 workers) as the company has battled inflation, supply-chain issues and a reinvigorated competitor in Mattel.

The eOne deal, which closed last December, resulted in a roughly $1 billion loss in the fourth quarter related to a charge for goodwill and asset impairment due to the transaction.

With TV and film production hobbled by the strikes, 2023 entertainment revenue totaled $575.5 million.

Total revenue for the quarter ended December 31, which encompasses the vital holiday sales period, slid 23% from the year-earlier quarter to $1.29 billion. Earnings fell from an adjusted $1.31 per share a year ago to 38 cents a share, far below analysts’ consensus expectation for 66 cents. Revenue from franchise brands like Transformers, Dungeons & Dragons, Nerf and Play-Doh fell 10% to $843.7 million, though the company said Transformers, Furby and G.I. Joe performed well in the quarter and met internal forecasts.

Executives were asked during a quarterly earnings call with analysts about the state of the company’s large-scale restructuring initiative, which has unfolded over the past several quarters. The company’s “Blueprint 2.0” reboot plan has called for a “doubling down on fewer, bigger brands,” leaving some question about future M&A in the wake of the eOne deal and other moves. “It’s largely done,” CEO Chris Cocks said of the effort to prune the portfolio. “There might be one or two more, and we would announce those deals in the next month or two.” CFO Gina Goetter added, “We’re done with the cleanup. So, as we head into 2024, we’re rebuilding. We’re building now.”

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