MW Hasbro has seen toy prices creep higher, and they should keep rising this year

By Tomi Kilgore

Toy maker beat earnings expectations, but stock reverses lower after CFO said most of its tariff-impacted inventory is still sitting on the balance sheet

Shares of Hasbro Inc. reversed into negative territory on Wednesday, as the toymaker's comments about the impact of tariffs and retailer spending patterns, and signs that toy prices will keep creeping higher this year, appeared to offset an upbeat earnings report.

The stock $(HAS.UK)$ had initially rallied in the premarket after earnings were released, to the highest prices seen since September 2022, as both second-quarter profit and revenue beat Wall Street projections. And the company provided details on its full-year outlook, something it didn't do in the previous quarter due to uncertainties over the tariff environment.

Then on the post-earnings call with analysts, Chief Executive Christian Cocks said, according to a FactSet transcript, that while current tariff rates are less than what was assumed when first-quarter results were reported in April, they still "represent a headwind for the business."

And Chief Financial Officer Gina Goetter said that although the company has incurred "minimal" tariff-related expenses so far this year, "most of the impacted inventory is still sitting on the balance sheet" and has yet to flow through its bottom line.

With that in mind, the company booked a $1.02 billion charge for the impairment of goodwill in the consumer products business, which includes toy and game products, which resulted in a large net loss for the second quarter.

The stock $(HAS.AU)$ dropped 0.7% in midday trading, but pared earlier losses of as much as 4.5%.

Goetter said the cost of tariffs was now expected to be a $60 million hit to earnings, compared with previous guidance of about $60 million to $180 million during the height of tariff uncertainties in April.

She also said that because uncertainty on tariffs remains, retailer spending patterns have changed.

"Many retailers are delaying holiday inventory builds and pushed shelf resets into [the third quarter], both of which weighed on [second-quarter] consumer products revenue and are requiring us to remain agile in the second half," Goetter said.

She said the company has moved to reduce the impact of tariffs, such has activating plans to reduce the sourcing of U.S. toy and game volume from China down to less than 40% by 2027 from about 50% today.

The company also acknowledged that toy prices have started creeping higher over the past couple months, and are likely to keep rising "slowly and consistently" through the rest of the year.

For 2025, the company said it expects revenue, excluding currency moves, to be up in the mid-single-digit percentage range. In Hasbro's fourth-quarter results released in February, the outlook was for revenue to be up slightly. In April, the company just said it wasn't changing its outlook given all the tariff uncertainty.

Meanwhile, for the quarter to June 29, overall revenue fell 1.5% from the same period a year ago to $980.8 million. That beat the average analyst estimate compiled by FactSet of $880.4 million.

Revenue for its largest segment, Wizards of the Coast and Digital Gaming, jumped 15.6% to $522.4 million, while the average estimate of two analysts compiled by FactSet was $447.5 million.

Within that business, "Magic: The Gathering" saw record growth, with revenue rising 23%, driven by the a record-setting release of "Final Fantasy."

Meanwhile, consumer-products revenue dropped 15.7% to $442.4 million, amid weakness in the toys business, and entertainment revenue fell 14.9% to $16 million.

Hasbro swung to a net loss of $855.8 million from net income of $138.5 million, due to the $1 billion goodwill impairment charge. Excluding special items, adjusted earnings per share rose to $1.30 from $1.22, and topped the FactSet consensus of 78 cents.

The stock has soared 37.8% in 2025, while shares of rival toy maker Mattel Inc. $(MAT.AU)$, which reports results after the closing bell, have rallied 13.8%. In comparison, the S&P 500 index SPX has gained 7.9% this year.

-Tomi Kilgore

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July 23, 2025 12:14 ET (16:14 GMT)

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