Hasbro, the parent company of the Seattle-area game publisher Wizards of the Coast, plans to lay off approximately 1,100 employees of its global workforce over weak sales that are expected to continue into next year.
The maker of toys like Transformers and Play-Doh declined to specify if the layoffs will hit Wizards of the Coast and Washington-based employees. The Rhode Island company also declined to break down total employee numbers by location.
Hasbro CEO Chris Cocks said in a memo to staff on Monday that weaker-than-expected sales hit as the market is coming off “historic, pandemic-driven highs.”
The “headwinds we anticipated have proven to be stronger and more persistent than planned,” Cocks said.
Monday’s layoffs, which will affect nearly 20% of Hasbro’s global workforce, are on top of the 800 positions eliminated earlier this year.
Despite Hasbro’s struggles, Wizards of the Coast, publisher of the popular games Dungeons & Dragons and Magic: The Gathering, performed well financially this year.
In the third quarter of 2023 announced in October, Wizards of the Coast revenue increased 40% compared to the same period last year largely due to licensing revenue from Baldur’s Gate 3, a video game based on Dungeons & Dragons released in the summer that won the Game of the Year award this month. Profits nearly doubled to $203 million in the quarter compared to the same period a year ago because of digital gaming revenue from Magic: The Gathering.
But according to Hasbro, Wizards of the Coast gains were not enough to offset losses. Hasbro revenue declined 10% in the third quarter compared to the same period last year because of an 18% revenue decline in consumer products and 42% decline in entertainment revenue. Its profit loss was $169.5 million.
“We need to modernize our organization and get even leaner,” Cocks said in the memo. “While we see workforce reductions as a last resort, given the state of our business, it’s a lever we must pull to keep Hasbro healthy.”
The headwinds Hasbro faces are because of the economic climate as customers are tightening their belts on nonessential items, including toys for holiday presents, said Aaron Trammell, an associate professor of Informatics at the University of California, Irvine, in an interview Tuesday. He added that the company is also coming off a pandemic-driven boom.
Citi Research analysts said in a note to clients in October that Hasbro continued to stumble through its turnaround, struggling to present achievable guidance in its October earnings. The analysts added in the note that “Wizards of the Coast continues to shine.”
Wizards of the Coast has an advantage over Hasbro’s toys: Its customer base, which is more specialized, is loyal and, as a result, not as impacted by the macroeconomic climate, Trammell said.
“These are fans that are actively looking to go out there and buy a product looking for a specifically curated experience,” Trammell said.
Wizards of the Coast’s headquarters are in Bellevue, and it has studios in Renton; Austin, Texas; Montreal; and Raleigh, N.C., according to Hasbro.
Besides the layoffs, Cocks also said the company would continue to explore its options to reduce its global real estate footprint, including closing its Providence, R.I., office after its lease ends in January 2025. The teams working from that location will be relocated to Hasbro’s headquarters in Pawtucket, R.I., Cocks said.
Hasbro shares fell 1.09% at market closing Tuesday. Its stock took a 6.9% dive Monday following the layoff news.
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