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Why Is Hasbro Stock Down 11.4% Year-to-Date?

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Stock suffers on lingering Toys “R” Us woes

Hasbro (HAS) and other toymakers in the United States have been left in the lurch due to the Toys “R” Us store closures, and e-commerce expansion is contributing to the challenging environment. Toymakers’ troubles have been compounded as children’s preferences have shifted to video games and digital-based toys.

On a YTD (year-to-date) basis, Hasbro stock has fallen 11.4% to $80.50 as of December 19. Similarly, Mattel (MAT), Take-Two Interactive Software (TTWO), and Jakks Pacific (JAKK) stocks have fallen 33.2%, 6.1%, and 9.4%, respectively. The S&P 500 Index has seen a YTD fall of 6.2%.

Specifically, Hasbro is facing inventory management troubles in Europe, and these troubles have negatively affected its top line growth. Foreign exchange volatility is also a concern.

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What lies ahead for Hasbro?

Product innovation remains a key priority for Hasbro. It plans to launch several product lines based on upcoming Disney movies, including Captain Marvel, Avengers, and Frozen 2, which could cushion its top line in 2019. For Nerf, Hasbro is gearing up to launch a line of accessories for Overwatch and Fortnite.

Moreover, Hasbro is confident that by 2019, its Toys “R” Us woes will be over for good. On the company’s third-quarter conference call, CEO Brian Goldner stated that once the retail transition is over, the company will move toward growth. He used the example of Canada, where the Toys “R” Us transition is over. Hasbro was able to grow in terms of both revenue and point-of-sale transactions in the third quarter.

Hasbro also added that new retailers are accelerating their efforts to capture market share, presenting the company with a significant opportunity to grow its top line. Hasbro is also making organizational changes that should result in annualized pretax savings of $30 million–$40 million by 2020.

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