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Hasbro reported a smaller-than-expected drop in first-quarter sales and easily beat profit estimates on Wednesday, as leaner inventories and steady digital gaming revenue helped cushion a drag from softer demand for toys.
Shares of the company, up roughly 14% this year, rose about 4% in premarket trading.
The Play-Doh maker has grappled with weakening demand over the past year amid a pullback in discretionary consumer spending and tight inventory planning by mass retailers like Walmart and Target.
However, efforts to clean up its inventory throughout 2023, along with cost efficiencies, helped its operating margin expand to 15.3%, from 1.8% last year.
“We made solid progress in our turnaround efforts in the first quarter,” Hasbro CFO Gina Goetter said.
The company’s owned inventory was down 53% in the quarter from the previous year, including a 57% decline for the Consumer Products unit.
Revenue from the Wizards of the Coast and Digital Gaming segment grew 7% in the quarter, driven by the popularity of its “Baldur’s Gate III” and “Monopoly Go!” games.
In contrast, its Consumer Products unit, which accounted for more than half its fiscal 2023 revenue, saw sales decline by 21%, hit by a broader slowdown in the toy industry and higher discounting from stock clearance by retailers.
The Nerf toy gun maker’s revenue fell 24.3%, to $757.3 million in the quarter ended March 31, smaller than the 26.2% drop to $738.6 million estimated by analysts on average, according to LSEG data.
On an adjusted basis, Hasbro earned 61 cents per share, beating analysts’ estimate of 27 cents per share.
The toymaker maintained the fiscal 2024 targets it set in February. It continues to expect revenue in the Consumer Products segment to decline between 7% and 12%, and revenue in its Wizards of the Coast segment to drop in the range of 3% to 5%.
On Tuesday, Barbie maker Mattel posted a smaller-than-expected loss for the first quarter, helped by its cost-saving measures.