Hasbro (HAS) Soars on Strong Q4 Earnings and Upbeat Guidance
Key Points:
* Hasbro shares surge 11% after exceeding profit estimates.
* Aggressive cost-cutting efforts drive strong earnings.
* Company aims to slash $1 billion in costs by 2027, exceeding previous target.
* Toy industry sees a potential bottoming out after years of decline.
* Hasbro projects modest revenue growth and improved margins over the next three years.
Financial Performance:
* Net sales: $1.1 billion, down 14.5% Y/Y, but above estimates of $1.02 billion.
* Adjusted operating profits: $164.8 million, up 1,390% Y/Y, surpassing estimates of $149.3 million.
* Adjusted EPS: $0.46, up 21% Y/Y, exceeding estimates of $0.34.
Outlook:
* Total revenue projected to increase modestly in 2025.
* Adjusted operating margin expected to reach 21%-22%, up from 20.3% in 2024.
* Net sales to grow by a mid-single-digit percentage annually through 2027.
* Adjusted operating margins to improve by 50-100 basis points annually.
* $1 billion cost savings target raised from previous guidance of $750 million.
Tariff Considerations:
* Toy industry faces potential headwinds from tariffs.
* Trump administration may implement tariffs pending a report on April 1.
* Hasbro and Mattel anticipate tariff impact but plan mitigating actions.
* Hasbro prepared to adjust pricing to offset tariff pressures.
Manufacturing Considerations:
* Almost 80% of US toys manufactured in China.
* Hasbro focuses on bringing sub-$10 and sub-$20 products to market.
* Domestic production expansion seen as challenging due to manual labor requirements and fast fashion nature of the industry.