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HAS Stock Down 6% as Hasbro Heavily Misses Q2 Earnings Estimates

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by Teuta Franjkovic · 4 min read
HAS Stock Down 6% as Hasbro Heavily Misses Q2 Earnings Estimates
Photo: Pixabay

Store closures, product shortages and lower retail inventory hampered Hasbro in Q2. After the company published a disappointing earnings report, HAS stock started falling.

Hasbro Inc (NASDAQ: HAS) posted lower-than-expected Q2 earnings on Monday and said a third-quarter recovery could set up a ‘good’ holiday season for the toy industry later this year.

The adjusted profits for the three months ending in June were 2 cents per share, pretty much worse than some analysts’ predictions of 23 cents per share. Group revenues, company added, fell 12.6% to $860.3 million, and missed analysts’ forecasts of it hovering around $994.6 million.

CEO Brian Goldner stated:

“The second quarter was much as we expected: strong point of sale for Hasbro brands countered by a very challenging revenue period due to global closures in our supply chain, across retailers as well as in entertainment production. We believe the outlook improves from here. Consumers – children, families, fans and audiences – are relying on Hasbro brands and stories to connect and entertain themselves throughout this period.”

Expecting Environment to Improve

He added that even though the full-year COVID-19 impact geographically remains unpredictable, as stores reopen and the company begins to return to production for entertainment “we expect the environment to improve in the third quarter and set us up to execute a good holiday season.”

Still, not everything is black in Hasbro’s case. The company’s gaming portfolio stayed strong during the quarter, with revenue in the category rising 11%, thanks to sales of games such as Jenga, Connect 4, Mouse Trap and Twister. Still, turmoils in Hasbro’s supply chain resulted in stock levels being quite lower and limited its number of shipments during the quarter.

Also, we shouldn’t forget the fact that Hasbro, works with major film studios, and that was also one of the reasons for its bad performance because the company took a hit from movie theaters being closed and a lack of new blockbuster features being released on the big screen.

Goldner noted:

“We have a strong entertainment lineup for 2021, through internally developed as well as third-party entertainment. We will also begin to see a greater benefit of synergies from the acquisition of eOne as we remain on track to deliver against our plan of $130 million in synergies by year-end 2022.”

While live-action TV and film production has been blocked by the pandemic, animation production went with its work for brands like Peppa Pig, PJ Masks and Hasbro’s upcoming “My Little Pony” feature film.

Hasbro Q2 Sales of Actions Figures Stayed Strong

Sales of action figures thorough the toy industry have been also pretty lame because of the postponing to the movie slate. Hasbro holds the master toy license for both Marvel and Star Wars. Still, Hasbro said that sales stood strong for its “Frozen 2” and “Star Wars” collections.

Zack’s analysts say that there is a strong correlation between near-term stock movements and trends in earnings estimate revisions. They commented that the estimate revisions trend for Hasbro was mixed.

They said:

“While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.”

Zacks analysts added that it will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead.

Factories on Chinese territory, which represent 55% of Hasbro’s production, were open during the quarter. However, stores in the U.S., Ireland and India were closed for most of that period. The company is now, according to Debbie Hancock, senior vice president of investor relations, targeting the latter part of the third quarter to be caught up.

She added that the cost of air freight went up during the COVID-19 outbreak and cautioned that if the company needs to depend more heavily on this method of shipping to meet demand, costs will go up.

At the time of writing, Hasbro stock was down 6.24% to $72.75.

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