What could comfort investors is bad news for kids and parents who, each birthday or holiday season, scour the shelves for the season's hottest playthings.
Amid a weaker-than-expected earnings report and risk of further losses over stopped shipments to Russia, toy giant Hasbro (HAS) is planning to raise prices on its toys and games.
The Rhode Island-based toy giant reported adjusted profits of 57 cents per share -- down 43% from 2021 and four cents below The Street's consensus forecast of 61 cents.
Sales Are Good But Costs Are Increasing
As revenue grew 4% year over year to just under $1.2 billion, the lower profits can be attributed to a number of problems faced by more than one industry this quarter -- rising costs of plastic and other supplies needed to make toys like Mr. Potato Head and My Little Pony, supply chain disruption due to a rocky emergence from a pandemic, and the company's attempts to avoid running out of stock by over-ordering products.
After Russia invaded Ukraine on Feb. 24, the toymaker was one of many companies that reacted by pulling its products out of Russia. While not enough time has passed for this to reflect in earnings, the company expects lose around $100 million from its loss of the Russian buyer.
Mr. Potato Head and Monopoly Will Get More Expensive
Between those factors, the company announced that it would be raising prices on toys and games across the board but did not provide details of specific numbers or percentages.
"In order to mitigate significantly higher input costs, we expect to implement price increases midyear," CFO Deb Thomas told analysts during the April 19 earnings call.
Amid the announcement, company stocks rose by 3.1% to $86.16 on the morning of April 19 and were still up 0.23% a day later. While pushback on the side of the consumer usually takes place after it can be felt at the store and on one's wallet, some dedicated fans of popular games like "Monopoly" and "Magic The Gathering" immediately took to Twitter (TWTR) to post their discontent.
"Hey @Hasbro?" user @nomadixxx wrote on his account. "Life long @Marvel fan here. Your new prices are mental. I'm out."
Toys like "Spider-Man: No Way Home" and games like "Magic: The Gathering" and "Dungeons & Dragons" were singled out by Hasbro for driving strong sales last quarter.
How Long Until People Protest?
Raising prices of everyday items is certainly not something unique to Hasbro. Amid record inflation in general, average toy prices rose by as much as 15% between 2019 and 2021.
Hasbro and rival toymaker Mattel (MAT) had already increased their prices in the run-up to last holiday season.
"This is due to higher product costs associated with our tabletop business, both in card stock and printing, increased freight costs, and ongoing headcount and product development investments to support the growing business, both near and long term," Thomas said.
While Hasbro has been seeing some pushback over rising toy costs from parents online, the increases have yet to a supply issues only accelerate demand for popular toys. The global toy market is expected to grow by a CAGR of 2.5% a year.
"When viewed within the context of prior price action, this is a continuation pattern, rather than a reversal pattern," Ed Ponsi wrote for TheStreet's Real Money at the start of the year. "This means the price should continue in the direction of its prior trend, which was bullish."
