Toy maker Hasbro confirmed in an email to Retail Dive that it plans layoffs that "will impact a single digit percentage of our global workforce." The company has 5,000 employees globally, about half of whom work in the U.S.
Hasbro on Monday reported that third quarter net revenues fell 12% to $1.57 billion from $1.79 billion in the year-ago quarter, reflecting lost Toys R Us revenues in the U.S., Europe and Asia Pacific. It also illustrates changing consumer shopping behaviors mostly in Europe, a rapidly evolving retail landscape and clearing through retail inventory. Foreign exchange had a negative impact of $32 million, or 2%, on third quarter 2018 revenues, according to a company press release.
Net earnings for the quarter were $263.9 million, and reported net earnings include a favorable $17.3 million tax benefit from US tax reform. Adjusted third quarter net earnings were $246.5 million, the company said.
Not even the holidays, an all-important season for any toy maker, will bring Hasbro the level of sales it needs to fully recover from the demise of mega-retailer Toys R Us, at least for this year. But on a conference call Monday, Hasbro executives said they expect the company to return to growth next year.
The company's plan to get there includes cost cutting, which will entail laying off workers. In a press release on Monday, Hasbro said it expects pre-tax cash restructuring charges relating to severance and other employee costs of approximately $50 million to $60 million to be expensed in the fourth quarter, but that layoffs would lead to $30 million to $40 million in annualized pre-tax savings by 2020.
"As part of Hasbro’s ongoing transformation we continue to make meaningful organizational changes," a company spokesperson told Retail Dive. "While some of these changes are difficult, we must ensure we have the right teams in place with the right capabilities to lead the company into the future. We continue to add new capabilities based on our understanding of the consumer and how our retailers are going to market, while evolving the way we organize our business across our Brand Blueprint."
Executives said this holiday period will be dedicated to building new partnerships. They also sought to downplay the importance of the impact of Toys R Us departure from the landscape, noting that Hasbro's gaming and entertainment lines (including the films Transformers and Bumblebee debuting soon) are a source of revenue, and that toys related to those enterprises are selling well. Last year, sales through Toys R Us dominated its third and fourth quarter revenue, they said.
Still, the holiday season will be strong, with momentum in sales in North America, and the company will offset its loss of Toys R Us sales by the first quarter of its fiscal 2019 year, executives said.
"The lost Toys R Us revenues are impacting many markets around the world, notably the U.S., Europe, Australia and Asia. The volume of product liquidated in the second quarter had a near-term impact on the third quarter sell through and shipments," CEO Brian Goldner said in a statement. "We are successfully managing retail inventory and it is down significantly in the U.S. and in Europe, where we are aggressively working to clear excess inventory by year end. A growing array of retailers are now ramping new programs to take share this holiday season and we are well positioned to meet their demand."