Toy manufacturer Hasbro had a rocky start to the new year as it received a downgrade from D.A. Davidson due to concerns about the outlook for the toy industry in 2024.
Analyst Linda Bolton Weiser downgraded Hasbro shares from Buy to Neutral and adjusted the price target from $60 to $53.
Bolton Weiser highlighted management uncertainty about the resumption of growth in the toy business as a key factor in her downgrade.
This downgrade follows Hasbro's recent announcement of significant workforce cuts, amounting to nearly 20% of its employees, citing weaker-than-expected toy sales in 2023 that are expected to extend into 2024.
Hasbro CEO Chris Cocks acknowledged the challenging market conditions, stating, "While we're confident in the future of Hasbro, the current environment demands that we do more."
This sentiment aligns with Mattel's previous warning in October, where CEO Ynon Kreiz also noted a slowdown in the toy industry following years of record growth during the pandemic.
Although both companies face headwinds, analysts such as Bolton Weiser are more optimistic about Mattel's prospects due to ongoing benefits from the Barbie movie and other factors that could help them weather the slowdown.
With overall toy sales decelerating, Bolton Weiser expresses concerns that Hasbro may face constraints in generating cash flow to pay off debt and provide dividends, potentially resulting in a dividend cut in early 2024.
Hasbro stock experienced a 1% decline on Tuesday, falling to $50.53. Over the past year, the shares have decreased by 17%.
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