Hasbro (HAS) earnings Q4 2022

Hasbro‘s 2023 outlook might feel like déjà vu. At first, anyway.

The toymaker on Thursday announced its fourth-quarter results while issuing conservative guidance for the year, mimicking the modest expectations it had when it entered 2022.

Hasbro is maintaining some optimism though, pointing to key bright spots from releases like Transformers and its growing Wizards of the Coast gaming division, which houses Dungeons & Dragons, along with the turnaround plan it announced in October.

Shares rose about 3% on Thursday.

Hasbro projected that full-year revenue will decline in 2023, but forecasted that the majority of the squeeze will be felt in the first half of the year. Hasbro said it expects revenue for the year to decline in the low-single digits, percentage-wise, which missed Wall Street’s expectations. Analysts surveyed by Refinitiv were projecting a 2.2% revenue increase.

The toy industry as a whole has felt a slowdown. Mattel had more optimism than Hasbro going into 2022 and had hoped that the holiday season would boost its dipping sales. But despite its confidence, the company underperformed in consumer product sales for its fourth quarter.

CEO Chris Cocks said on a call with analysts that he expects the slowing consumer demand that weighed on this year’s sales will continue into the first three quarters of 2023, but he hopes it will lighten up in the last quarter.

Cocks also said on the call that Hasbro would be looking to introduce a product line priced between $20 to $30, a cheaper option to help target the inflation-weary consumer.

In the toy industry, “anything below $30 is performing quite well. Anything above that is performing quite poorly,” UBS Executive Director Arpiné Kocharyan told CNBC.

Hasbro is maintaining hope that new releases like expansion packs for Dungeons & Dragons and Magic: The Gathering games will pay off and compensate for product sales declines. “There’s a lot of entertainment coming in Q2 that will have a nice halo effect in Q3 and Q4,” said Cocks. The company announced on Thursday that Magic: The Gathering is on track to be its first billion-dollar brand.

In general, for Wizards of the Coast, Cocks said, “You should expect an up Q1, a down Q2, a significant up Q3, and a fair up Q4,” which is based on the timing of the game’s new releases.

“By and large, this company outlook is going to be determined by how strong Wizard is,” Kocharyan told CNBC, noting that the gaming segment was a boon for dips in product sales.

“For this company, in terms of what makes or breaks it, a strong 2023 is going to be determined by how they fix some of the core brand portfolio led by Nerf,” Kocharyan added. Nerf lost some market share in the fourth quarter due to lower-priced competition.

The company, which houses brands like Peppa Pig and Play-Doh, has taken several hits in recent times, which led it to proceed with caution into 2022.

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