
Hasbro held its Q4 & Full Year 2022 Financial Call and made several announcements regarding the company’s current situation and future plans.
Hasbro’s new strategic plan, Blueprint 2.0, focuses on fewer, bigger, and more profitable brands, a sharpened focus on key categories, and growth initiatives in digital games, content, direct-to-consumer, and licensing. The company made progress in improving its bottom line despite a disappointing Q4, with $50 million in run-rate cost savings identified in 2022 and an anticipated $150 million in run-rate savings in 2023. Hasbro’s Direct Business and Wizards of the Coast, and Digital Gaming saw growth, with Magic: The Gathering reaching a billion-dollar brand milestone. However, there were challenges, including supply chain disruptions, pricing assumptions, and misfiring in updating the Open Game License. Hasbro’s licensing business was up 5%, with success in preschool, creativity, and action categories. The company is focused on growing market share and content centered around Hasbro IP. In 2023, Hasbro anticipates revenue to be down low-single digits, but progress in cost savings, operational excellence, and key brand initiatives is expected to drive continued operating margin expansion.
CEO Chris Cocks stated:
“In October, we laid out our new strategic plan for Hasbro, Blueprint 2.0, built on fewer, bigger, more profitable brands; a sharpened focus on the categories where Hasbro can be best in class; an Operational Excellence program to speed our agility and improve our cost competitiveness; and growth initiatives in digital games, Hasbro content, direct to consumer and licensing. While Q4 proved to be a disappointment, particularly in our traditional Toys and Games segment, we made progress under the hood that meaningfully improved our bottom line and sets us up for margin expansion in 2023 despite what we anticipate will be a continued challenging consumer environment.”
You can check out our full report, after the jump.
Mr. Cocks also elaborated on their entertainment plans:
“In Action, we have one of our strongest content lineups in a decade including 6 blockbuster films, a host of new streaming series, and some of the strongest new product innovations for TRANSFORMERS in years set against the launch of the Rise of the Beasts feature film in June. In Preschool, we are excited by the continued global appeal of PEPPA PIG and our new line based on the upcoming hit series, Star Wars: Young Jedi Adventures from Lucasfilm. In Creativity, PLAY-DOH is growing share and we are adding new compounds like Nickelodeon Slime and bringing best-selling innovations like our PLAY-DOH Ice Cream Truck into the new year. And in Games, we are adding all-new innovation like the casual AR game TWISTER AIR, building on the best-selling CLUE escape room series, extending our audiences in MAGIC with our newest Universes Beyond set based on JRR Tolkien’s Lord of the Rings series, Tales Of Middle Earth, growing our distribution for Magic Arena with our upcoming launch on Steam, and reaching all-new, global audience scale for D&D with our new blockbuster movie, Dungeons & Dragons: Honor Among Thieves, and AAA video game, Baldur’s Gate III, from our partners at Larian later this year.”
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“Our focus on content is centering around Hasbro IP for the long-term. Our sales process for the majority of eOne Film & TV is well underway with strong interest in these valuable assets. We expect to have an update in the second quarter. Our content pipeline for Hasbro IP is set for growth in 2023 with the upcoming release of the feature films, Dungeons & Dragons: Honor Among Thieves and Transformers: Rise of the Beasts, and a host of new and continuing preschool and kids shows from Transformers: Earthspark to the next seasons of My Little Pony and Peppa Pig to the new Kiya and the Kimoja Heroes on Disney Jr. and Disney+. Looking ahead, we are excited about the recently announced D&D Live Action series and, for next year, the animated TRANSFORMERS feature film with our partners at Paramount.”
Deb Thomas, Chief Financial Officer:
“We spent less on advertising last year, aligned with our focus on fewer brands, and lower film advertising in our entertainment segment as we comped the My Little Pony movie in 2021 and supported fewer film releases in 2022. The team plans to increase advertising support of our key brands and categories in 2023, increasing the overall spend but with a much more targeted approach.”
She also stated that Hasbro will be transitioning several Hasbro brands from in-house to [master] license models.
During the Q&A Session, Hasbro stated that they will be exiting the Sesame Street, Disney Princesses, and Trolls businesses this year.
Also, the company will be announcing more brands that they will be converting from in-house to master licenses where other companies will produce toys instead of Hasbro.
You can check out the presentation slides attached with this news post.
News Post: HISSTANK Coverage Of Hasbro Q4 And Full Year 2022 Financial Call
Well, none of that really sounds all that encouraging.
Q4 losses
https://news.hisstank.com/wp-content...-FINAL_008.jpg
Whole year. The 2022 overall year stuff revenue being down 9% to 6% is not great for them.
https://news.hisstank.com/wp-content...-FINAL_009.jpg
Q4 losses in more detail. Includes whole year detail also on right side
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So as to not risk being called stupid, I'm not a financial expert so please forgive any amateur mistakes I make and point them out. The Q4 stuff definitely has a whole bunch of () symbol changes which denote negative changes.
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Overall Q4
-17% Revenue total.
-26% Revenue in consumer retail, +22% Revenue from Wizards of the Coast.
Hilarous, so the portion of the company now on fire was what saved Hasbro in Q4 from cratering. Should make them very nervous.
https://news.hisstank.com/wp-content...-FINAL_011.jpg
Wizard's did +22% this year Dec Q4 over last year's Q4.
Sounds great until you realize to get this growth year long might burn them long term so yea. Guess they can take the Win on this hollow victory.
https://news.hisstank.com/wp-content...-FINAL_016.jpg
Q4 Consumer product( toys etc) Revenue declines and growth by World regions.
https://news.hisstank.com/wp-content...-FINAL_020.jpg
Biggest takeaway Year by Year is Hasbro burned through half their cash reserves since 2021 by Dec 2022 while paying pretty much the same dividend and doing a stock buyback of 125 Million.
Operating cash flow went from
2021 818
to
2022 375.
https://news.hisstank.com/wp-content...-FINAL_025.jpg
*edit: Took out a wrong part here
The statement also charges a Good Will Impairment on Power Rangers in the EBITDA section, which means they paid above market for Power Rangers and the value of Power Rangers as an Asset has declined, so take that info nugget if you're interested. I don't actually understand that section very well.
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https://news.hisstank.com/wp-content...-FINAL_037.jpg
(Why are all the numbers reversed in value? Negative positive, positive negative etc.)
So basically, Hasbro looks perfectly smart raising prices even more given Star Wars and Marvel had record growth.
This tells me higher prices aren't affecting how much people are buying in these properties. Which means expect prices to go even higher.
The 30% decline in "Emerging Brands" from Q421 to Q422 it appears excludes Peppa Pig, which got promoted to "Franchise Brand" in 2022; but footnote 1 (this is all slide 13) doesn't quite make it clear if that 30% drop is because of Peppa Pig's promotion (alliteration!) or if some other brand in '22 absolutely tanked. Was Peppa Pig moved to 2021 Franchise Brand column to make comparison more even or not? Not clear in the slide.
My only other takeaway is that one aggressive shareholder who was trying to force a stock split by getting Hasbro to sell off WOTC may be onto something (but is still very weird and aggressive about it). It's a highly stable market in an otherwise super volatile sea.
None of this tells me anything I can see w/r/t price for the year. Shrug. Would at least like to hear some executive thinking on the relationship between a volatile MSRP and sales.
JTA had an interesting take on it:
"So it seems even though Hasbro had a pretty bad 2022 and a really bad holiday season that Star Wars and Marvel toys are still seeing growth, at least for the full year. Now the big question is ? and this is something that was of course not addressed at all: how much of that revenue growth is explained by higher prices and how were actual unit sales affected? Prices for figures were up by almost 30% for select figures in 2022. It?s not unreasonable to assume that actual unit sales may be down and that the higher price point for many figures compensated for that."
Curious quote from their article:
"at least one analyst thinks both Marvel and Star Wars looked tired in the holiday season"
I tend to enjoy taking the long game approach. These short term losses and market shake ups are best to be viewed through a long lens as likely this too shall pass. And unlike some I don't look to Hasbro raising its prices as the ultimate reasons for their current troubles. There is likely a lot going on at the big 'H', not least of which their very recent and sudden loss in key directional leadership. They are understandably going through growing pains and perhaps Chris isn't the guy who can steer the ship long term, but we shall see how he pivots. All of that said, again it's best to sit back and just see how it all plays out.
If GIJoe is growing, do they now count it towards their flagship products instead their emerging brands?
Keep reading: HISSTANK Coverage Of Hasbro Q4 And Full Year 2022 Financial Call - Page 2
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