Hasbro hampered by near-term cost pressure after bumper holiday sales

(Reuters) – Hasbro Inc warned on Monday that profit could come under pressure from investments in new video content and toys after a year when the toymaker’s sales rose during the coronavirus crisis.

The company is working on a new “My Little Pony” animated feature film, as well as developing fresh toy and game lines for its preschool brands Peppa Pig and PJ Masks later this year, while also boosting advertising.

“We see that profitability expanding over time. But in the near term, that is going to add some cost pressure,” Chief Financial Officer Deborah Thomas said on a post-earnings call.

Hasbro will invest between $675 million and $750 million on content across scripted and unscripted live action, animated TV and film in 2021, up from $439 million last year.

Shares fell 4% in early trading, reversing course from gains before the bell on a fourth-quarter revenue beat, driven by demand for its toys linked to “Star Wars” and “The Mandalorian” as well as its collectible cards game “Magic: The Gathering”.

Still, some analysts said the additional investments would be a positive for the “Monopoly” maker.

“The investments in content, advertising, existing brands, alongside the launch of new ones are necessary to spearhead innovation and will drive Hasbro’s multi-faceted growth narrative,” CFRA Research analyst Camilla Yanushevsky said.

Hasbro also said it would face higher costs as it struggles to keep certain products, including “The Child” toy and “Operation Pet Scan” board game, in stock.

“We’ve been able to meet demand despite challenges in shipping and port congestion, but the cost of doing so is increasing,” CFO Thomas said.

Revenue jumped 21% to $1.72 billion in the three months ended Dec. 27, beating a Refinitiv IBES estimate of $1.69 billion.

Excluding items, Hasbro earned $1.27 per share, also topping estimates of $1.14.

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