Photo credit: www.forbes.com
Hasbro has impressed the market with a robust first-quarter earnings report that surpassed expectations, primarily driven by a surge in its digital gaming sector and the ever-popular Magic: The Gathering franchise.
The toy manufacturer witnessed its stock price climb more than 16% midday following the report of a 17% increase in quarterly revenue compared to the previous year. Additionally, its adjusted earnings per share reached $1.07, exceeding analysts’ predictions by over 50%.
The substantial growth can largely be attributed to the company’s Wizards of the Coast and Digital Gaming divisions, which experienced a remarkable 46% increase in revenue. This rise was fueled by new content releases in the Magic: The Gathering series, alongside consistent licensing income from the mobile game Monopoly Go!
On the other hand, sales of conventional toys fell by 4%, yet this decline was notably less severe than anticipated.
Today’s positive market reaction mirrors the enthusiasm displayed after Hasbro’s fourth-quarter and full-year earnings announcement in late February, when their proactive measures for cost reduction and inventory management led to a stock price increase of over 12% shortly after the disclosure.
Kidults as Growth Catalysts
In its “Playing to Win” strategy, Hasbro highlighted the importance of digital gaming and offerings targeted at older consumers, termed the “kidult” demographic, as vital components for future growth.
During a conference call with investors, Hasbro’s CEO, Chris Cocks, expressed confidence in their strategic plan, noting that the first quarter’s results serve as a testament to the success of the “Playing to Win” initiative. “This quarter provides clear evidence of our strategy at work—play-focused, partner-scaled, and performing,” Cocks remarked.
Cocks also provided reassurance regarding concerns over tariffs, asserting that Hasbro is effectively positioned to mitigate any financial strain due to its focus on digital sales and diversified sourcing, both domestically and internationally.
However, the company acknowledged that it may have to implement price increases on certain products if the proposed 145% tariffs on Chinese imports are enacted. In some cases, Hasbro may choose to forgo introducing specific toys if profitability becomes unfeasible.
Maintaining Consumer-Friendly Prices
Hasbro’s strategy includes focusing on products available at “critical consumer-friendly price points, especially $9.99 and $19.99,” as Cocks highlighted during the earnings discussion.
The company has opted to maintain its full-year guidance despite the uncertain tariff landscape. James Zahn, Editor-in-Chief of The Toy Book, interprets Hasbro’s steadfast guidance for 2025 as a hopeful indication that global trade difficulties may soon be resolved.
“Hasbro’s improvements in supply chain and sourcing over the last few years have positioned them well for dealing with uncertainty,” Zahn observed. He noted that Hasbro had proactively reduced its reliance on Chinese suppliers years before the current tariff tensions escalated, and this transition is now driving additional sourcing adjustments.
This improved positioning in the face of tariff challenges could also enable Hasbro to capture a greater market share in conventional toys. “There’s a significant opportunity for Hasbro to expand its shelf space and market share as smaller companies struggle to cope with tariffs and fulfill orders affordably,” Zahn concluded.
Furthermore, the strong first-quarter results are a positive sign not only for Hasbro but also for the broader toy industry, which Zahn believes could benefit from a morale boost given the ongoing challenges. He forecasts that 2025 could be a year of growth for the U.S. toy sector, provided the tariff situation is swiftly resolved.
Source
www.forbes.com