Hasbro is laying off about 1,100 employees as the toy maker struggles with soft sales that have carried into the holiday shopping season, according to a company memo obtained by CNBC.
Hasbro employed about 6,300 workers earlier this year, according to a company fact sheet.
The company's shares fell more than 4% in extended trading Monday.
“We expected the first three quarters to be challenging, especially in toys, where the market is coming off historic pandemic-driven highs,” CEO Chris Cocks said in the memo. “While we have made significant progress across our organization, the headwinds we saw in the first nine months of the year have continued into Holiday and are likely to persist into 2024.
Hasbro, which laid off hundreds of workers earlier this year, warned in October that trouble was coming. In the company's most recent quarterly earnings report, Hasbro lowered its already soft full-year outlook, forecasting a 13% to 15% decline in sales for the year.
Sales of popular toy brands were down significantly, Hasbro also said in its October quarterly report. Popular brands such as My Little Pony, Nerf and Transformer were down 18% at the time due to 'softer category trends'.
The company's shares fell nearly 20% through Monday's close.
Read the full memo from CEO Chris Cocks:
Team,
A year ago, we outlined our strategy to focus on building fewer, bigger and better brands and began the process of transforming Hasbro. Since then, we have achieved a number of significant achievements, including redesigning our supply chain, improving our inventory position, reducing costs and reinvesting more than $200 million in the business, while increasing our market share in many of our categories increases. But the market headwinds we expected have proven stronger and more persistent than planned. While we are confident in Hasbro's future, the current environment requires us to do more, even if these choices are among the most difficult we have to make.
Today we are announcing additional workforce reductions as part of our previously communicated strategic transformation, impacting approximately 1,100 colleagues globally, in addition to the approximately 800 workforce reductions already implemented.
Our leadership team came to this difficult decision after much deliberation. We recognize that this is difficult news that will impact the livelihoods of our friends and colleagues. Our focus is on transparent communication with each of you and supporting you during this period of change. I want to start by discussing why we're doing this now and what's next.
Why now?
We entered 2023 expecting a year of change, including major updates to our leadership team, our structure and our scope of operations. We expected the first three quarters to be challenging, especially in Toys, where the market is coming off historic pandemic-driven highs. While we have made significant progress within our organization, the headwinds we saw in the first nine months of the year have continued into Holiday and are likely to persist into 2024.
To position Hasbro for growth, we must first ensure our foundation is solid and profitable. To do this, we must modernize our organization and make it even leaner. While we view workforce reductions as a last resort, given the state of our business, it is a lever we must use to keep Hasbro healthy.
What happens now?
While we are implementing changes across the organization, some functional areas will be more impacted than others. Many of those whose roles are affected have been or will be informed in the next 24 hours, although timings will vary by country, in accordance with local rules and subject to consultation with employees where appropriate. This includes team members who have raised their hand to resign from their positions at the end of the year as part of our Voluntary Early Retirement Program (VRP) in the US. We are extremely grateful to these colleagues for their years of dedication. and we wish them all the best.
The majority of notifications will occur over the next six months, with the remainder occurring over the next year as we address the remaining work on our organizational model. This includes standardizing processes across Finance, HR, IT and Consumer Care as part of our Global Business Enablement project, but it also means doing more work across the business to minimize layers of management and create an agile organization .
What else do we do?
I know this news is especially difficult during the holidays. We value all our team members; they are not only employees, but also friends and colleagues. We've decided to communicate now so people have time to plan and process the changes. For affected employees, we are offering comprehensive packages, including job search support, to help with their transition.
We have also done what we can to minimize the scale of the impact, such as launching the VRP and exploring options to reduce our global real estate footprint. In that regard, our Providence, Rhode Island office is currently not being used at full capacity and we have decided to vacate the space at the end of the lease term in January 2025. Over the next year, we'll be welcoming teams from our Providence office to our headquarters down the road in Pawtucket, Rhode Island. It's an opportunity to reimagine the way we work and ensure our workspace is vibrant and productive, while reflecting our more flexible personal cadence since the pandemic.
Looking forward
As Gina often says: cost cutting is not a strategy. We know that and that is why we will continue to grow and invest in various areas in 2024.
As we discover more cost savings, we will invest in new systems, insights and analytics, product development and digital – while strengthening our leading franchises and ensuring our brands get the essential marketing they need to thrive well into the future .
We will also leverage unlocked potential across our business, such as our new supply chain efficiencies, our direct-to-consumer capabilities and key partnerships to maximize licensing opportunities, scale entertainment and free up our own content dollars to stimulate the development of new brands. .
I know there is no sugarcoating how difficult this is, especially for the employees directly affected. We are grateful for their contributions and wish them all the best. In the coming weeks, let's support each other and work together to make these necessary changes so we can return to growing our business and achieving Hasbro's mission.
Thank you,
Chris