Having apparently chosen to ignore the very loud warnings from Wall Street that such a development was on the horizon should they keep on their current path of corporate greed, Magic: The Gathering developer Hasbro has announced that, roughly a year after having undertaken similar cost-cutting measures, continuing struggles in their toy division has led them to reduce their work force by 1,100 members.
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This decision by the toy conglomerate, whose other notable brands include Dungeons & Dragons, Power Rangers, and G.I. Joe, was first made public on the afternoon of December 11th via an official filing with the United States Security and Exchange Commission.
“On December 11, 2023, following a further review of the Company’s cost structure and organizational design, the Company announced additional strategic steps to position the business for future growth, including a revised organizational structure whereby certain corporate functions are anticipated to be supported by a third-party outsourcing provider as well as additional headcount reductions under the Operational Excellence Program,” the company informed the regulatory body. “The Additional Actions are expected to deliver gross annual run-rate cost savings of approximately $100 million.”
Further details pertaining as to what the move actually entailed was later provided to employees via an internal memo penned by current Hasbro CEO Chris Cocks.
“A year ago, we laid out our strategy to focus on building fewer, bigger, better brands and began the process of transforming Hasbro,” he opened. Since then, we’ve had some important wins, like retooling our supply chain, improving our inventory position, lowering costs, and reinvesting over $200M back into the business while growing share across many of our categories.”
“But the market headwinds we anticipated have proven to be stronger and more persistent than planned.” he then detailed of the reasoning behind the company’s decision. “While we’re confident in the future of Hasbro, the current environment demands that we do more, even if these choices are some of the hardest we have to make.”
To this end, the memo then revealed, “Today we’re announcing additional headcount reductions as part of our previously communicated strategic transformation, affecting approximately 1,100 colleagues globally in addition to the roughly 800 reductions already taken.”
“Our leadership team came to this difficult decision after much deliberation,” said Cooks. “We recognize this is heavy news that affects the livelihoods of our friends and colleagues. Our focus is communicating with each of you transparently and supporting you through this period of change. I want to start by addressing why we are doing this now, and what’s next.”
“We entered 2023 expecting a year of change including significant updates to our leadership team, structure, and scope of operations,” he continued. “We anticipated the first three quarters to be challenging, particularly in Toys, where the market is coming off historic, pandemic-driven highs. While we have made some important progress across our organization, the headwinds we saw through the first nine months of the year have continued into Holiday and are likely to persist into 2024.”
“To position Hasbro for growth, we must first make sure our foundation is solid and profitable,” admitted Cocks. “To do that, we need to modernize our organization and get even leaner. While we see workforce reductions as a last resort, given the state of our business, it’s a lever we must pull to keep Hasbro healthy.”
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Cocks further informed employees that in light of both their ongoing efforts “to reduce our global real estate footprint” and the fact that the building was “not being used to its full capacity”, these cost-cutting measures would also see them exit their Providence, Rhode Island office space “at the end of the lease term in January 2025”, affected employees of which will be folded into the company’s neighboring, Pawtucket-based headquarters.
“I know there is no sugar-coating how hard this is, particularly for the employees directly affected,” Cocks concluded the memo. “We’re grateful to them for their contributions, and we wish them all the best. In the coming weeks, let’s support each other, and lean in to drive through these necessary changes, so we can return our business to growth and carry out Hasbro’s mission.”
As noted above, this is not the first such employee reduction to be undertaken by the company behind My Little Pony this year, with January seeing Hasbro announce an initial round of 800 layoffs.
Unsurprisingly, this move was likewise fueled by the company’s then-already slumping sales, which effected all of its core brands save Magic: The Gathering.
“We’re continuing to see the Wizards of the Coast business performing well, particularly the Magic: The Gathering business, which year to date is up 5%, whereas the general games category are down as low as much as negative 8%, depending on which source you look at,” said Cocks during the company’s Q3 2022 earnings call in October 2022.
And unfortunately for the once-beloved toy company, their fortunes did not turn around.
As per the company’s Chief Financial Officer Gina Goetter during their recent October 26th, 2023 Q3 2023 earnings call, “Total Hasbro revenue of $1.5 billion was down 10% versus last year.”
“The impact of the broader toy category declines has had a change in our consumer products and total Hasbro outlook,” she further detailed. “Based on this, we now expect total Hasbro, Inc. revenue to be down 13% to 15%.”
“Based on the category trend in Q3, we are planning for modest improvement in Q4 as we begin to lap the market declines from last year,” she added. “We believe that retailers will remain cautious with their inventory positions, which will have an impact on typical holiday order patterns.”