Hasbro Earnings: Toy Firm Shines as Games and Digital Demand Hold Up in Tough Environment

Thanks to exposure to the right strategic growth categories, narrow-moat Hasbro could capture stellar operating margin performance in its second quarter. While the consumer products segment continues to decline as the firm prunes underperforming brands and out-licenses certain lines (with sales down 20%, but just 6% on a like-for-like basis), the Wizards of the Coast, or WOTC, and digital gaming segment keeps outperforming, delivering 20% growth as Monopoly Go surpasses expectations. Moreover, as digital comprises a larger mix of the WOTC and digital segment, margins have delivered upside, with adjusted segment margins climbing nearly 1,700 basis points over last year. With WOTC and digital representing 45% of the total sales mix in the period, Hasbro printed a 25% adjusted operating margin, a high-water mark for the firm. Even if the benefits of Monopoly Go begin to erode, we think a full-year enterprise-level 20% operating margin is in sight. We expect the WOTC segment to face headwinds from lapping more launches in 2023, leading to a midteens segment sales decline in the back half of 2024.