What happened
Shares of entertainment company Hasbro (HAS +1.10%) fell sharply on Monday after the company released earnings results for the second quarter of 2020. As you probably guessed, results were below expectations. And it's why the stock was down 7% as of 1 p.m. EDT.
Hasbro's results were down almost across the board, as the COVID-19 pandemic disrupted retail sales and pushed back live-action film projects.
Image source: Getty Images.
So what
Hasbro is a global operation with several business segments. Its toys and games are sold at many retail chains. But with physical spaces closed for the coronavirus, Hasbro shipped less than it's accustomed to. Regions with low e-commerce penetration were hit particularly hard. Sales in Latin America were down 64%, and sales in Asia were down 31%. These contributed to the 13% year-over-year drop in overall revenue.
However, the 13% drop doesn't tell the whole story. Hasbro has acquired Entertainment One (eOne) since last year, and Q2 2020 results reflect this. If you add eOne's revenue back to last year's results (a one-time modification known as pro forma), then Hasbro's revenue fell 29% from last year.
The one bright spot for Hasbro was its gaming segment. The company owns iconic properties like Jenga and Twister. Consumers sheltering at home relied on games to fight the boredom, and this demand lifted segment revenue by 11%.
But this one bright spot wasn't enough to overcome everything else. According to generally accepted accounting principles (GAAP), Hasbro had a net loss of $34 million in Q2. Maybe this is partly why the stock still trades at a steep discount to 52-week highs.
Now what
Dividend investors can breathe easy for now. Hasbro is still paying its dividend as planned Aug. 17. And at today's stock price, it offers the high-yield return of 3.5%.
Thinking beyond the next dividend payout, Hasbro needs to recover lost revenue and return to profitability. On that front, things look promising. Sales have picked up as retail chains have reopened, and live-action film productions are resuming. And some big projects, like the My Little Pony movie that's slated for a 2021 theatrical release, weren't disrupted at all.
In short, it appears Hasbro is on the path to recovery after a rough Q2.
