Earlier today, everyone’s favorite toy company — aka Hasbro — reported last quarter’s results. Wall Street didn’t like the news too much, and the stock price dropped a few points after the report. Although Hasbro made a profit, they reported an operating profit of $302 million.
But then again, revenue for the quarter was down 15% compared to the corresponding quarter in 2023, and year-to-date revenue was even down 18%. Hasbro is becoming more and more like a Magic company. Wizards of the Coast and digital games have kept Hasbro afloat. However, revenue from consumer products, such as classic toys, continues to decline. What about Star Wars? The brand was mentioned in presentations for the first time in years, and Hasbro even talked about Star Wars during an earnings call while answering investor questions. Let’s just say it’s not pretty. Click to learn more!
Spoilers…
Hasbro, also known as Magic The Gathering: The Company, becomes a card printing and digital gaming company. MTG accounted for about one-third of last quarter’s $1.28 billion in revenue and 60% of its $301.9 million operating profit.
While consumer products were once again profitable, with profits reaching $121 million, Wizards’ operating margins were 44.9%, while consumer products (also known as toys, board games, NERFs, and action figures) had operating margins of 14.1%.
Hasbro is shrinking with no end in sight. Consumer staples revenue fell another 16% last quarter. The outlook for the fourth quarter wasn’t too promising either, so Wall Street wasn’t too happy with the results.
Hasbro currently predicts that the operating profit rate of consumer products for the full year will be 4-6%, with a total decline of 12-14%.
In addition, Hasbro paid $98 million in dividends to shareholders. I think all the employees who were laid off were happy that they had contributed to further increasing the wealth of the rich. Indeed “excellent”.
But what we’re most interested in: Star Wars. There’s been no mention of Star Wars in recent reports, really nothing, but for the first time in almost forever Hasbro has at least mentioned the brand in a presentation and even on an earnings call. They even mention it a few times here.
Okay, first, let’s look at overall partner brand performance (all licensed toys are in this area): $190.1 million. This was a decrease of 18% compared to the 2023 quarter. You have to remember that the third quarter is traditionally Hasbro’s strongest quarter as retailers/e-tailers place orders over the summer for the holiday season. So while the holiday season tends to see the most sales on the consumer side, the previous quarter is often the best for toy companies like Hasbro because their customers are retailers.
The results for the third quarter of 2024 are the worst numbers yet. There is no competition. This is a disaster. Taking a look at the chart, you can see how low partner brand revenue will be in 2024:
Click to enlarge
All Season 3 results are color coded green. This past quarter was even worse than the already terrible third quarter of 2023. The excuse for withdrawing licenses to impact numbers is no longer valid. When Hasbro started exiting licenses, those exits accounted for about 50% of the decline. But the process is now largely complete, with the decline in 2024 mainly due to worsening sales. For the entire consumer product space (including action figures), declining sales have been the deciding factor so far, and Hasbro even provided a nice chart in their presentation. So the decline we’re seeing now is almost entirely a decline in sales.
Partner brand revenue in the third quarter of 2024 was only 54% of what it was two years ago. That’s a staggering drop in sales. Of course, some exited licenses will also impact the numbers here.
Also, Hasbro clearly felt the need to tell it like it was for the first time in years, maybe that’s a dig at Lucasfilm/Disney, no one can tell what’s going on behind the scenes, but if Hasbro actually And instead of considering quitting they should at least consider a deal that is more beneficial to them. Because, sadly, 2024’s Star Wars is more like a millstone around Hasbro’s neck. What was once an entertainment and toy giant has become the butt of jokes and jokes. It’s so pitiful. In every way. Shows, games, toys – everything no longer works.
So maybe that’s why Hasbro made changes to Star Wars during its earnings call. I will quote verbatim:
Weak toy revenue was due in part to our decision to reduce sales volume to improve profitability, as well as incremental weakness in action figures, Especially Star Wars. We view action figures as a long-term bet for the company, with Hasbro having a particular niche with fans ranging from preschoolers to children to adults. Therefore, we are bullish on the segment eventually returning to growth.
and
Nerf and the continued softness of the doll, Especially Star Warsalso contributed to the quarter’s decline.
Hasbro has repeatedly talked about how “special” Star Wars is leading to declining and “weak” sales. Nothing happens by coincidence and I believe this is Hasbro’s way of publicly telling Lucasfilm how tired they are of these toys and their continued failure to produce something that the majority of fans enjoy and in turn lead to success Toy line stuff.
So maybe Hasbro is just overtly putting a show on Lucasfilm’s bow. Because all this time, Hasbro has never actually said anything about the rapidly declining sales of Star Wars toys, or just said it in passing, even though it was obvious. This time they specifically mentioned Star Wars (no other partner brands, not Marvel, etc.) and said it was “particularly” responsible for the drop.
Maybe Hasbro feels the need to tell the story like this year, with The Following and the upcoming — and almost certain to fail — Skrull Crew , two of the “main” shows on Disney+ this year that won’t be able to Any toys for sale.
But Hasbro is clearly determined to stick with the license, or at least the dolls (they are still the market leader in the doll segment, with about 25% of the overall doll market, albeit down 1.6 percentage points). They seem to be hoping for better times and keep investing. In fact, they explicitly mentioned that The Mandalorian and Grogu movie is what they’re looking forward to. Unfortunately, the movie won’t be released until May 2026. For whatever reason, if that movie toy line fails, I think all bets are off.
So we finally got it from the horse’s mouth. Star Wars is no longer for sale. That’s not surprising considering the team’s current situation. The show failed. AAA video games failed. The chances of Skeleton Crew bucking the trend are slim to none. We’ve all seen the toys Hasbro was forced to make for the show. They can clog shelves or end up on the bottom shelf at Ollie’s.
That’s it. Hasbro is slowly moving away from board games and toys toward digital games and trading cards, in line with Chris Cox’s strategy. These Magic cards cost next to nothing to produce, and the profit margins are huge. From a business perspective, this is understandable. If Magic loses its luster, Hasbro will be in deep trouble. In fact, I believe they will end. Maybe Chris shouldn’t put all his eggs in one basket. But right now, all the games like Monopoly Go (mobile game) and Wizards of the Coast are making money.
What else: The situation in Europe is particularly dire. European consumer goods sales fell 22%, while in the United States they fell only 8%. The situation was equally bad in Latin America, down 21%, and only Asia grew 33%, but Asia is a very small market for Hasbro. The United States is by far the largest market when it comes to toys: 61%.
Bottom line: Star Wars is in a bad place in 2024. This is a disaster. Hasbro is slowly moving away from toys because printed thin cardboard is more profitable and for unknown reasons people keep buying them.
Hasbro isn’t even to blame for the poor state of Star Wars toys in 2024, the main culprit is Lucasfilm (and Disney). Even a genius can’t sell The Acolyte toys. Why can Katherine Kennedy still find a job?
Hasbro earnings report
Hasbro Revenue Demonstration (PDF)
Hasbro earnings conference call transcript comes from “The Globe and Mail”
