What happened

The stock of Hasbro (NASDAQ:HAS) is trailing the market this year. It fell 29% compared to a 4% decline in the S&P 500 through the end of June, according to data provided by S&P Global Market Intelligence.

The stock had been down as much as 60% at the market bottom in March but has rebounded since then, and its losses are now about even with rival Mattel's (NASDAQ:MAT).

A family playing a board game together.

Image source: Getty Images.

So what

Both toy and game giants have been under pressure as the COVID-19 pandemic harmed retailing and entertainment spending in recent months. Investors only got a hint of that headwind in Hasbro's first-quarter report in late April, which showed declining sales and net losses. CEO Brian Goldner said at the time that demand, in stores and online, was set to turn lower as social distancing gripped countries in North America and Europe. Mattel showed a more direct impact, with sales falling 12% in the fiscal first quarter than ran through late March .

Now what

Investors will learn the full scale of the pandemic's effect on Hasbro when the company reports second-quarter results on July 27. Most Wall Street pros are predicting that revenue will rise by about 6% for that period as online demand for home entertainment products offset lost sales from retail store closures.

But the path of Hasbro's stock from here will depend more on its inventory position and management's outlook for the crucial holiday shopping season that tends to deliver most of its profits for the fiscal year.