Hasbro (HAS) shares slumped lower Friday after the toy and games maker said it would slash around 15% of its global workforce and warned that a disappointing holiday season would see it post softer-than-expected fourth quarter earnings.
Hasbro said it will cut around 1,000 jobs, with announcements coming over the next few weeks, including the departure of COO Eric Nyman. The Monopoly and Play-Dough maker also said fourth quarter sales would likely fall by around 17% from last year's levels to $1.68 billion, pulling adjusted earnings into a weaker-than-expected range of between $1.29 and $1.31 per share.
The Pawtucket, Rhode Island-based group is expected to publish its formal earnings on February 16.
"Despite strong growth in Wizards of the Coast and Digital Gaming, Hasbro Pulse, and our licensing business, our consumer products business underperformed in the fourth quarter against the backdrop of a challenging holiday consumer environment," said CEO Chris Cocks.
"We are focused on implementing transformational changes aimed at substantially reducing costs and increasing our growth rates and profitability," he added. "While the full-year 2022, and particularly the fourth quarter, represented a challenging moment for Hasbro, we are confident in our Blueprint 2.0 strategy, unveiled in October, which includes a focus on fewer, bigger brands; gaming; digital; and our rapidly growing direct to consumer and licensing businesses."
Hasbro shares were marked 7.4% lower in early afternoon trading Friday to change hands at $59.06 each, extending their six-month decline to around 25%
Last year, Hasbro pushed-back at an effort by Activist investors Alta Fox Capital Management, which held a 2.5% stake in the group, to put one of its allies on the board of directors and push for major changes at the toymaker following the loss of a lucrative licensing contract with Walt Disney (DIS).
Alta Fox wanted the group puts a new strategy in place and separate its profitable 'Wizards of the Coast' gaming operation
Wizards of the Coast and Digital Gaming segment revenues, in fact, were up 22% from last year over the fourth quarter, Hasbro said, to around $339 million.
Hasbro, for its part, wants to cut costs and improve competitiveness by expanding operating margins.
"We think (CEO Chris) Cocks now has two strikes against him on the credibility front," said D.A. Davidson analyst Lindon Bolton Weiser, who lowered her price target on Hasbro by $18, to $95 per share, following last night's update.
"Earlier in the year, he had said HAS would hit its growth expectations in 2022 regardless of the macro environment and after unveiling his strategy, he said we would see tangible evidence of its effect on results starting in 4Q22," she added. "We'll be interested in hearing if the company will be maintaining the long-term growth targets laid out in early October 2022, including a 50% increase in operating profit over the next three years."
