What happened
Shares of Hasbro (HAS 0.49%) were up 2.3% as of 2:12 p.m. ET on Thursday. The company missed revenue and earnings estimates, as lower consumer spending in the holiday quarter impacted demand for toys and games.
However, investors already had low expectations, given the fall in the stock over the last year.
So what
It was a very challenging retail environment during the fourth quarter, which hit the Transformers owner hard. Weak performance across the business, including its usually strong gaming segment, led to a decline of 6% on a currency-neutral basis in 2022, with revenue falling 14%, adjusted for currency, in the fourth quarter. Management noted that they made progress to bring inventory in line with demand, but there is still work to do.
Given the difficult operating environment, management is focused on what it can control, which is improve profitability. Market participants love to hear that in this environment, but Hasbro still has a lot to prove before it can sustain shareholder returns. It continues to trail the three-year quarterly revenue growth of Hot Wheels owner Mattel.
Data by YCharts
Now what
Hasbro expects the weak demand trends to carry forward into the first half of 2023. The market is likely looking ahead to a potential recovery in the second half of the year, but management's guidance calls for full-year revenue to be down in the mid-single-digit range.
Since the stock is already trading at a cheap valuation and pays a high dividend yield of 4.71%, some investors might see the stock as a good value right now. But a safer course might be to wait for better revenue performance before buying the stock.
