Despite
higher prices, people continued to spend on Nerf blasters, Power Rangers action
figures, and Magic: The Gathering cards, helping Hasbro overcome rising costs
for materials and freight, the company said Tuesday.
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Hasbro said its
revenue for the second quarter increased 1 percent from a year earlier, but
profit grew by 10 percent, beating analyst expectations, as price increases and
demand overcame higher costs and currency losses.
Hasbro’s earnings
report is a promising sign for other companies that also sell discretionary
products as consumers are being squeezed by rising inflation and higher costs
are eating into corporate profit margins. Many of those companies will report
their quarterly results in the weeks to come.
Consumer prices in
the
US jumped 9.1 percent in June, the fastest pace in 40 years. But that did
not stop some shoppers from opening their wallets, with retail sales rising
more than expected in June.
Hasbro raised
prices in the second quarter, which helped the company make up for higher costs
for materials like paper and plastic, Deborah Thomas, Hasbro’s chief financial
officer, said on a call with analysts. The move could benefit its profit margin
even more in the third and fourth quarters, she said.
Hasbro’s toys and games “tend to be small luxuries
that consumers value pretty highly”, Chris Cocks, the company’s CEO, said on
the call. During economic downturns, fans of games like Magic: The Gathering
and
Dungeons & Dragons in particular are “very resilient”, he said, “with a
deep well of savings and a large amount of passion”.
The company’s
business unit that includes Magic: The Gathering and Dungeons & Dragons had
its best quarter for sales, $420 million, up 3 percent from a year earlier.
Hasbro recently
teamed up with The New York Times to develop a board game based on Wordle.
In what is likely
to be a theme at other multinational companies, Hasbro’s revenue was held back
by a strong dollar, the company said, particularly for sales in Europe, where
the euro recently fell to parity with the US dollar for the first time in 20
years. Converting sales from other currencies into dollars cut nearly $33
million from revenue in the second quarter, Hasbro said.
The toymaker also
said that
Russia’s invasion of Ukraine would affect its results this year. Last
year, $115 million of the company’s revenue came from Russia.
“We will not have
this revenue and associated operating profit in 2022,” Cocks said.
Hasbro’s shares jumped nearly 3 percent in early trading
before settling at a gain of about 1 percent. Its rival toymaker Mattel will
report its latest quarterly earnings Thursday.
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