Hasbro Stock Jumps 10% As It Convinces Wall Street To Believe In Magic

Hasbro is betting on sales of the Marvel Super Heroes edition of its Magic: The Gathering line of trading cards to boost its earnings this year.

Joan Verdon

Hasbro CEO Chris Cocks spent much of today’s earnings call explaining to Wall Street analysts why the company’s most profitable brand, Magic: The Gathering, has staying power, and why it is a safe bet for future earnings.

While the trading card game is “by far our biggest brand, in many ways it’s also the least understood,” Cocks said on an hour-long conference call to discuss Hasbro’s second-quarter earnings.

The majority of the questions from analysts during the call involved Magic"The Gathering", with the analysts sounding a bit like boomer parents trying to understand why their 35-year-old is spending hundreds of hours, and hundreds of dollars (or more) on a collectible trading card game.

Cocks, in turn, sounded like a Magic player patiently explaining to Mom or Dad why Magic ‘just a fad’.

In addition to being a billion dollar brand that consistently enjoys double-digit revenue growth, Cocks explained, Magic has been compounding its fan base for more than 30 years, creating "tens of millions of fans who treat the game as a lifelong pursuit, rather than a passing trend.”

Cocks’ decision to devote most of his opening comments on the call to discussing the economics of Magic paid off, with the stock jumping more than 10% after the call. It fell back some from that high, but remained up more than 7% at midday.

Hasbro reported revenue of $1.1 billion for the second quarter, which ended June 28, up 16% year-over-year. Revenue was up 15% for the first six months of this year.

Adjusted operating profit for the quarter was up 14%, at $282 million. Net earnings were $1.12 per diluted share and adjusted net earnings per diluted share were $1.28.

The biggest revenue growth driver during the quarter was the Wizards and Digital Gaming segment, which includes the Magic brand. It saw sales spike 27%, led by record-breaking sales of the new Magic release, Marvel Super Heroes.

But traditional toys also showed strength, with the consumer products segment up 5%.

The growth in traditional toys is particularly encouraging for Hasbro and the industry in general, said James Zahn, Editor-in-Chief of The Toy Book and Senior Editor of The Toy Insider.

“Hasbro’s gaming business is a behemoth, so it’s of little surprise to see the growth trajectory continue,” Zahn said. “It’s very good news to see that momentum carry over into toys and consumer products, with brands like Peppa Pig and G.I. Joe proving that traditional toys still matter and that legacy brands still resonate with audiences spanning preschoolers to adult collectors,” he said.

Zahn noted that Hasbro has a number of hot properties launching as it heads toward the holiday season, including the release this month of KPop Demon Hunters role-play toys, and toys tied to the new Marvel Spider-Man release.

Blooms by Play-Doh, a Play-Doh set designed for grownups that lets adults make elaborate floral arrangements out of Play-Doh, “is off to a massive start with quick sellouts at retail,” Zahn said.

Today’s results show “Hasbro’s strategy is paying off,” Zahn said. “We can see that in how they’re leaning into strengths while finding the right partners to play with the brands in their toy box.”

A cyber attack on Hasbro in the March impacted the second quarter by delaying $40 to $60 million in consumer products revenue to the second half of the year. The incident is expected to cost Hasbro $20 million in additional expenses this year.