Hasbro to sell film and TV unit, lowers forecast due to Hollywood strike impact.

Hasbro to sell film and TV unit, lowers forecast due to Hollywood strike impact.

Hasbro Lowers Revenue Forecast as Hollywood Strike Takes Toll

Hasbro

Hasbro, the renowned toy and game company, has announced a lowering of its annual revenue forecast due to the ongoing strike by Hollywood writers and actors. In response, the company plans to sell its Canadian film and TV business in order to focus on its core business of selling toys and games.

Shares of Hasbro rose 4.3% in early trading after the announcement, as the company had actually beaten second-quarter revenue estimates. However, with the strike posing a significant challenge, the toy company had to adjust its outlook.

The Impact of the Strike

The strike has affected various aspects of the entertainment industry, with Warner Bros Discovery also acknowledging the uncertainty it brings. Many shows and movies have been put on hold, leaving production companies scrambling to find alternative solutions.

Hasbro’s decision to divest from its film and TV studio, eOne, for approximately $500 million and sell it to Lionsgate Entertainment, is seen as a strategic move to mitigate the impact of the strike. eOne contributed around 85% of Hasbro’s entertainment segment revenue last year. This sale is part of Hasbro’s plan to adopt an “asset light model for future live action entertainment,” relying on licensing and partnerships with co-productions instead.

James Zahn, editor of trade magazine The Toy Book, commented on the sale, stating that “With the sale of its eOne Film & TV business to Lionsgate, Hasbro is dodging a bullet in terms of the content pipeline.” This sale will enable the company to focus on its core business while reducing its exposure to the negative effects of the strike.

Margin Pressure and Lowered Outlook

Hasbro expects its entertainment segment’s margins to be impacted by both the strike and the lackluster box office performance of its movie, “Dungeons & Dragons: Honor Among Thieves,” which resulted in a $25 million charge. As a result, the company has revised its revenue forecast for fiscal 2023, anticipating a decline of 3% to 6% compared to its previous expectation of a low-single-digit fall.

Furthermore, Hasbro adjusted its growth target for adjusted operating margin, lowering it to a rise between 20 and 50 basis points (bps), compared to the initial forecast of 50 to 70 bps.

Despite these challenges, Hasbro beat analysts’ average revenue estimates for the quarter with a net revenue of $1.21 billion, compared to the expected $1.12 billion.

Looking Ahead

While Hasbro’s revised outlook showcases the impact of the Hollywood strike on its financial performance, the company remains confident in its ability to navigate these challenges. By focusing on its core business of toys and games, divesting from its entertainment segment, and exploring licensing and co-production opportunities, the company aims to create a more resilient and agile business model.

As the entertainment industry evolves and faces disruptions, strategic decisions like Hasbro’s divestment from eOne and prioritizing its core business demonstrate the company’s ability to adapt and respond to changing market conditions. With a positive outlook and its continued commitment to innovation and creativity, Hasbro is well-positioned to overcome challenges and capture new opportunities in the ever-changing landscape of the entertainment industry.

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