Hasbro’s Q1 net profit doubles, trading card games “single-handedly save the day”

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On May 20, Hasbro announced its first quarter financial results.

The financial report shows that the company’s net profit attributable to shareholders for the quarter reached $198.4 million, more than doubling year-on-year; earnings per share were $1.39, a significant jump from $0.70 in the same period last year; adjusted earnings per share excluding special items were $1.47, beating analysts' expectations of $1.12. Quarterly revenue was $1.00 billion, up 12.7% year-on-year.

However, behind these seemingly impressive results, performance varied significantly across different business segments.

Breaking it down, the core engine of organic growth, Wizards of the Coast and the digital gaming division, was the biggest contributor to incremental earnings this quarter, whereas the growth of the traditional consumer products division was far less optimistic than the increase in reported profits might suggest.

Specifically, Wizards of the Coast and the digital gaming division posted a 26% increase in revenue this quarter, operating profit reached $298 million, and operating profit margin was about 51%, making it the main source of company profits.

The core driver remains the trading card game Magic: The Gathering.

This product saw a 36% increase in revenue during the quarter, thanks to strong demand for the newly launched “Lorwyn Eclipsed” series, the “Teenage Mutant Ninja Turtles” crossover series, as well as continued sales of backlist titles.

According to analysis estimates, Magic: The Gathering’s revenue has expanded to around $470 million, with this single product line now making up nearly half of the company’s total revenue. The licensed game “Monopoly Go!” also contributed $41 million in revenue for the quarter.

By contrast, digital and licensed gaming revenue grew by only 3%, lagging significantly behind the strong momentum of physical Magic: The Gathering cards.

The consumer products division’s revenue was flat year-on-year for the quarter, with an adjusted operating loss of $41 million, a 31% increase compared to the same period last year.

Management attributed the widening loss to normal quarterly factors, increased tariff costs, and a high base effect from prior-year licensing revenue. This flat revenue but expanded loss pattern suggests that the division is under pressure when it comes to pricing power and cost pass-through mechanisms in the current environment.

Highlights this quarter focused on derivative products related to the upcoming “The Mandalorian and Grogu” movie and the “Star Wars” toys and games product lines, but whether the boost can be sustained depends on market reaction after the film’s release.

The entertainment division’s revenue fell 24% this quarter, with operating profit at $17 million. The revenue decline was primarily related to the timing and scale of content transactions.

The entertainment division’s revenue share was limited this quarter and insufficient to change the company’s overall earnings structure, though ongoing revenue fluctuations remain an area of concern.

The company reaffirmed its full-year outlook, expecting revenue growth of 3%-5% at constant exchange rates, adjusted operating margin of 24%-25%, and adjusted EBITDA of $1.4 billion to $1.45 billion.

The company also announced it will maintain a quarterly dividend of $0.70 per share, to be paid to shareholders of record as of June 1 on June 11, reflecting management’s intention to reward shareholders as profitability improves.

Additionally, at the earnings briefing, the CFO said the company is working to improve operating leverage, prioritizing investment in key brands, and steadily repurchasing shares, with capital allocation direction unchanged.

The entire toy industry faced two major challenges in the first quarter: raw material cost increases and tariff uncertainty, as reflected in the continued deterioration of profit margins in the consumer products division. Although the company’s rapid game business growth offset some downward pressure within the toy division, profitability resilience across the toy portfolio remains weak.

However, the strong cash flow from the gaming business has provided the company with room to optimize debt. This quarter, the company used $96 million to repay debt, and issued $400 million in new notes to fully repay debt maturing in November 2026, with the remaining funds used to repurchase higher-interest long-term bonds.

Hasbro delivered a first-quarter report card with doubled net profits, but its profitability structure relies heavily on the continued output of the single product Magic: The Gathering. The consumer products division, under the dual pressure of tariffs and fluctuating industry demand, is still some way from a full recovery.

Full-year guidance remains unchanged, indicating management’s expectations for the overall fundamentals of the next three quarters. However, to maintain the current valuation and ensure sustained share price performance, management must still find a more solid balance between game business momentum and restoration of toy business profitability.

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