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The success of the Barbie and Transformers movies this summer set high hopes for toymakers. But it turns out, kids would rather watch movies about toys than actually play with them.
Hasbro, home to Play-Doh, Monopoly and Transformers action figures, this week said it will cut about 1,100 jobs, on top of 800 lay-offs that have already taken place this year. Combined, this would represent a 29 per cent decrease in the company’s global workforce. The move is expected to generate $100mn in annual cost savings. But its main challenge — namely how to compete against video games, smartphones, streaming services and other electronic devices — remains.
The Nerf gun maker is under pressure to cut costs as it faces a slowdown in sales following a surge during the coronavirus pandemic. Inflation-weary consumers are reining in discretionary spending, including on toys.
At Hasbro, sales are down 11 per cent in the first nine months of the year. It has racked up $428mn in net loss during this period, compared with a profit of $332mn last year. It warned this week that the headwinds had continued into holiday shopping season and were likely to persist into 2024.
Data group Circana said US toy sales were down 8 per cent year on year in the first nine months of 2023.
Hasbro has sought to counter the secular decline in toy sales with a pivot into entertainment, leveraging characters into TV shows and films. But even here it has faced unexpected hiccups in the form of a writers and actors strike. Revenues from the entertainment unit fell 42 per cent during the third quarter.
Shares in Hasbro, down 24 per cent this year, have given up nearly all of their post-pandemic gains. The stock is trading on 14 times forward earnings, on a par with Mattel. This seems overpriced given that Mattel has fared better sales-wise.
Waning demand for physical toys will have ramifications outside of companies that make them. Expect retailers with exposure to toy sales — such as Target — to take a hit too.
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