Hasbro Announces Major Staffing Cuts & Declining Sales

In an unfolding story from the toy industry, Hasbro, the toy manufacturer known for properties such as Transformers, Nerf, Magic: The Gathering, Peppa Pig, and Dungeons & Dragons, is going through a significant restructuring phase. The company recently announced it would be letting go of approximately 1,100 employees. The decision comes as a response to the decline in sales it has experienced, which has unfortunately continued into the holiday shopping season.

Hasbro, which had a formidable workforce of 6,300 team members at the start of the year, has had to make this difficult decision due to faltering fortunes. The tough market conditions saw the company’s shares plummet more than 5% in pre-market trading on Tuesday. The situation also cast a shadow over its competitor Mattel’s stock.

This is not Hasbro’s first round of layoffs this year. Earlier in the year, the company sent around 800 employees packing, predicting a rough patch ahead. The forecasts turned out to be true, as indicated in Hasbro’s latest quarterly earnings report. The company had to revise its already bleak annual forecast, now projecting a hefty 13%-15% drop in revenue. This decline in sales has mainly hurt popular brands like My Little Pony, Nerf, and Transformers, which experienced an 18% dip at the time. The company attributes the slump to “softer category trends.” As a result, Hasbro’s stock has taken a nearly 20% hit.

Hasbro’s competitor Mattel has also signaled troubles due to soft sales. However, Mattel’s stock has risen by around 6%, primarily due to the commercial success of the movie “Barbie.” This growth, however, lags behind the 17% rise that the S&P 500 has marked this year. This trend of reduced sales and the subsequent drop in stock prices anticipates a lukewarm holiday season for retailers. Moreover, toys are being offered at lower discounts to customers than they were a year ago.

According to a detailed memo from Hasbro’s CEO, Chris Cocks, the layoffs are part of the company’s strategic transformation efforts. Despite several wins, such as revamping its supply chain, improving inventory positioning, and lowering costs, Hasbro’s market headwinds have proven more formidable than anticipated. Hasbro’s leadership believes that to grow, the company needs to streamline its operations and get leaner. Hence, they see workforce reductions as an unavoidable step to ensure the company’s health.

“We anticipated the first three quarters to be challenging, particularly in Toys, where the market is coming off historic, pandemic-driven highs. While we have made some important progress across our organization, the headwinds we saw through the first nine months of the year have continued into Holiday and are likely to persist into 2024.”

Chris Cocks, CEO of Hasbro, via CNBC

Employees affected by the restructuring will be given comprehensive packages, including job placement support to help them as they transition. In addition, the company aims to downsize its global real estate footprint and will be exiting its Providence, Rhode Island, office, which is not being used to its full capacity.

Looking forward, Hasbro intends to focus on growth and investment in 2024, tapping into its business’s potential areas, including supply chain efficiency and direct-to-consumer capabilities. As the company uncovers more cost savings, it plans to invest in new systems and product development while bolstering marketing efforts for its brands.