A Quick Word About Hasbro's Disastrous Q1/2023 Earnings, Star Wars Affected Too

Hasbro presented their numbers for fhe first quarter of 2023 two weeks ago. This is usually on my radar, but I was a bit busy, so I only get to talk about it now. And to make it as short and painless as possible: it’s horrible! And Star Wars toys are almost certainly once more in dire straits. Click through for more!

Ok, so let’s dive right in without much preamble!

Net revenues are down by 14.9% compared to Q1/2022, 1,0001 billion USD vs 1,1631 billion USD.

Operating profit is down by a whopping 85% 17.9 million USD vs. 120 million USD one year before.

Hasbro lost money in Q1/2023, -22.1 million USD for them, compared to a net earning of 61.2 million USD one year before. Adjusted earnings are equally dismal, Hasbro made a plus of 1 million USD in the first quarter vs 79.4 million USD one year before.

And now to what us interests the most here, partner brands performance!

Partner brands revenue is down 36% – 132.7 million USD vs 206.5 million USD one year before.

Star Wars was not mentioned even once. None of the partner brands received a mention, including Marvel. You know what that usually means. Partner brand sales were already down by a lot in Q4/2022.

And to put the $132.7 million partner brands revenue in perspective: when Star Wars toy sales were very negatively affected the last time, in 2018 and early 2019, partner brands revenue was still a lot better. In Q1/2019 partner brands revenue was 172 million USD. Now of course it is impossible to say how much Star Wars contributed here, but we do know that Hasbro reported tremendous growth for Star Wars toy sales in 2020 (in the range of 70%). You do not report this kind of growth unless your sales had tanked before. And now, in 2023, overall partner brands revenue is even much worse than it was in early 2019. And remember, prices are up to 30% higher now compared to early 2019. Now imagine what that means for unit sales. All the momentum created by the early Mandalorian seasons has evaporated again. In fact, things are almost certainly much, much worse than they were in the already quite horrible 2018/19 period, after The Last Jedi and Solo.

In the earnings call Hasbro emphasized again that they have high hopes for Young Jedi Adventures in the preschool segment. After watching one episode (more about that probably eventually) I am not certain this trust is justified. This series is as cookie cutter bland as possible.

So in short: after a horrendous fourth quarter 2022 the first quarter 2023 is just as disastrous for the company. Maybe insane price hikes and atrocious packaging for your collector focused action figures were not such a good idea after all. If you consider that prices are now up to 30% higher than just a few short years ago and if you also consider the disastrous revenue decline for the partner brands in the past six months (i.e. Star Wars, Marvel etc) then unit sales must have tanked spectacularly following the price hikes and change to pfp packaging.

Nothing was said about paper free packaging and its eventual phasing out later in 2023 and early 2024.

Only Magic The Gathering keeps growing for the company, they report a 16% growth here.

And that’s it. Overall things look bleak. In the earnings call Hasbro was optimistic about Star Wars, because of The Mandalorian season 3 (too bad the season was not what they probably hoped for), Young Jedi Adventures and the other upcoming shows. I am not sure this optimism is justified. We will see in three months from now when Hasbro report their next results.

Hasbro’s stock price has declined by 30% compared to 12 and also 24 months ago. In other words: the company lost 1/3 of its value in the past 12 months. Only your other most favorite company, Disney, is doing even worse, their value has been cut in half  in the past 24 months.

However, the toy industry in the US as a whole is facing challenges, Hasbro is not alone. Major rival Mattel reported a net loss of 106 million USD for the first quarter. And their revenues are down by 22% even, even worse than Hasbro. And their company value has also been reduced by roughly 1/3 in the past year. So you have to see Hasbro’s woeful performance also in light of this. High inflation, retailers overstocking previously (expecting shipping issues) make things difficult. But when we talk about Star Wars then sales are also absolutely impacted by very high prices and packaging that many fans absolutely hate. And while we do not have details it is very likely sales in 2023 are even worse than in the really bad 2018 / early 2019 period. Hasbro managed to recover from that with 70% growth for Star Wars in 2020. I wonder if they can repeat the same feat again. Of course this always depends also on the quality of the movies and shows released by Disney. But lower prices and traditional packaging would also help.

Hasbro Earnings Q1/2023
Hasbro Earnings Presentation (PDF)
Hasbro Earnings Call Transcript on Motley Fool

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