Hasbro Faces Reduced Revenue, Earnings Amid Film Tentpole Delays

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S&P Global Ratings forecasts retail closures and delays of major theatrical titles will strain the toy giant's financial performance this year.

Debt ratings agency S&P Global Ratings on Thursday reduced its 2020 revenue and earnings forecasts for toy giant Hasbro over concerns around the impact of the COVID-19 crisis on its retail and production pipelines.

Following Hasbro's earnings release on Wednesday, S&P Global said retail store closures and delays in the production and delivery of film and TV episodes by its Entertainment One business due to public health guidelines will lower full-year revenue and EBITIDA assumptions by the credit agency. 

EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a key measure used by analysts and investors to measure a company's overall financial performance.

"Restrictions on out-of-home consumer activities intended to prevent the spread of the coronavirus have reduced Hasbro's toy sales in its brick-and-mortar retail channel and it appears that the company's e-commerce sales will offset this decline to varying degrees depending on the region," the credit agency said Thursday in an ratings report.

S&P Global analysts also argued Hasbro's toy and merchandise sales around theatrical releases will also be impacted by the major Hollywood studios delaying most tentpole rollouts until later this year and into 2021.

"We expect that the delay of major theatrical releases, which for Hasbro have so far included Marvel Studios' Eternals, Ghostbusters: Afterlife and Venom: Let There Be Carnage, will lead to a significant decline in the company's reported revenue from this segment in 2020," the credit agency said.

eOne released 1917 during the recent first quarter, but the ensuing COVID-19 crisis shutting down movie theaters pushed additional releases to later in 2020 or 2021, or shifted them to video-on-demand windows. And Hasbro seeing movie titles go straight to premium VOD could impact the timing and success of toy launches, S&P Global warned.

In addition, eOne having to delay its TV production and delivery as Hollywood production virtually shuts down amid the pandemic will reduce entertainment division revenues and earnings this year. "We expect that if eOne is mostly able to resume production early in the third quarter, Hasbro's TV/film/entertainment segment will likely report a 25 percent-35 percent decline in revenue for 2020 compared with 2019," the credit agency forecast.

Despite the retail closures and production delays, S&P Global analysts said Hasbro's "strong liquidity will position it to weather the potential volatility in its revenue and EBITDA over the next several months."

Added the credit agency, "Our outlook on Hasbro remains stable despite our lower revenue and EBITDA forecast, which could result in the company's leverage increasing slightly above our 3.75x downgrade threshold during the year."