Hasbro Inc. says that supply chain challenges delayed $100 million in merchandise during the third quarter, but most of that has been delivered by the fourth quarter.
Toys had been a category identified in the summer as at risk by the supply chain bottlenecks around world. Those problems persist, but Hasbro
says it continues to work its way over the hurdles.
“We are expertly managing the supply chain to ensure the shelves will be filled with Hasbro products this holiday,” said Rich Stoddart, interim chief executive officer, on the Wednesday earnings call.
Stoddart was named to the interim position after the death of Chief Executive Brian Goldner earlier this month.
“As a result, we believe we will grow revenue in the fourth quarter through the combination of our three business segments, and deliver full year double-digit revenue growth in the range of 13% to 16%, along with adjusted operating profit margins in line with last year’s adjusted rate of approximately 15%.”
Hasbro reported third-quarter profit that beat expectations and revenue that was in line with Street consensus.
The company’s entertainment segment soared 76% with the Netflix film “My Little Pony: A New Generation” and “Fear the Walking Dead” standouts.
“While Q4 risk is still ahead of us in a highly seasonal business, we believe Hasbro’s implied guidance today for Q4 somewhat de-risks holiday season, given what’s known today about product that has already been shipped quarter to date (majority of that $100M shifted into Q4 out of Q3) and what’s on the water,” wrote UBS in a note.
“More importantly, ’21 holiday season will be about lack of supply, not demand.”
UBS rates Hasbro stock buy with a $116 price target.
“We are increasingly confident in Hasbro’s 2021 outlook in the wake of management providing a stronger than expected full-year revenue forecast while
maintaining a flat y/y operating margin view of 15%,” wrote MKM Partners analysts.
“The combination of these two variables helps ease fears about the upcoming holiday season.”
Moreover, MKM highlights the Wizards of the Coast and digital gaming results, which showed a 32% increase during the quarter.
“While we recognize the importance of Hasbro’s toy/consumer products business, Wizards is the company’s most profitable segment and when combined with Entertainment, contributes ~65% of overall adjusted EBITDA,” the note said.
MKM rates Hasbro stock buy with a $118 price target.
CFRA is also upbeat about Hasbro’s entertainment category.
“We believe Hasbro will outperform as its entertainment and digital segments drive margins and sales higher,” wrote Zachary Warring.
CFRA rates Hasbro stock buy and cut its price target to $110 from $120.
Hasbro stock is up 7.8% for the week and has gained 3.2% for the year to date.
The S&P 500 index
has advanced 22.2% for 2021 so far.