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Toy manufacturer Hasbro anticipates a potential $300 million impact on its earnings if the current 145% tariff imposed on imports from China by President Donald Trump remains in effect. News of this potential impact comes as the company navigates the complexities of the ongoing trade war between the U.S. and China, affecting the entire toy industry.
Hasbro Anticipates Financial Impact from China Tariffs
Despite exceeding earnings expectations on Thursday, the company’s projections are causing concern among investors and analysts who are closely monitoring the impact of the trade dispute with China, a key manufacturing hub for the toy sector.
Uncertainty in Tariff Environment
Hasbro has maintained its full-year guidance from the previous quarter, acknowledging the uncertainty surrounding the current tariff landscape.
- “Our forecast assumes various scenarios for China tariffs, ranging from 50% to the rate holding at 145% and 10% for the rest of world,” stated Gina Goetter, Hasbro’s CFO and COO, during the earnings call.
- She added this could result in an estimated ” $100 million to $300 million gross impact across the enterprise in 2025, before any mitigation.”
Strategic Flexibility Amidst Challenges
Chris Cocks, Hasbro’s CEO, commented during the earnings call, stating that “while no company is insulated, Hasbro is well positioned,” emphasizing that its unchanged guidance is “supported by our robust games and licensing businesses and our strategic flexibility.”
He acknowledged that “prolonged tariff conditions create structural costs and heighten market unpredictability,” clarifying that “ultimately tariffs translate into higher consumer prices.”
Potential Job Losses
Cocks also cautioned about “potential job losses as we adjust to absorb increased costs and reduced profit for our shareholders.”
Impact on Various Business Segments
The effect of tariffs varies across Hasbro’s different divisions, influencing how the company plans to adapt to the changing trade conditions.
- The U.S. games business benefits from both digital channels and domestic production, as a large number of their board games are manufactured in Massachusetts.
- Wizards of the Coast, which includes Magic: The Gathering and Dungeons & Dragons, faces a tariff exposure of less than $10 million, with much of the domestic product being made in North Carolina, Texas, and Japan, according to Cocks.
Toy Segment Affected More Severely
The toy segment experiences a more significant impact due to the increased proportion of goods manufactured in China. Cocks conveyed that the company is exploring alternatives for relocating its supply chain to different nations.
According to Cocks, “Some of that, though, comes with the cost,” specifically mentioning that “When we manufacture board games in the U.S., it is significantly more expensive to manufacture here than it is in China.”
As an example, the company can potentially shift the sourcing of Play-Doh from China to its plant in Turkey, where manufacturers could redirect shipments from Europe to the U.S., and Chinese factories could compensate by supplying the European market. However, Cocks noted that “other products are more difficult to triage, especially those that include electronics, high end deco and foam components”.
“China will continue to be a major manufacturing hub for us globally, in large part due to specialized capabilities developed over decades,” Cocks stated.
Goetter implied that most of the manufacturing modifications are expected to appear in 2026, contingent on whether those prospective nations possess the abilities and infrastructures to produce these products.
Mitigation Strategies and Cost Management
Hasbro is also intensifying its $1 billion cost savings initiative to partly counterbalance the strains of the tariff. However, Cocks said that price increases were inevitable. “We are going to have to raise prices inside of 145% tariff regime with China,” Cocks explained further. “We’re just trying to do it as selectively as possible and minimize the burden to the fans and families that we serve.”
Goetter and Cocks both admitted that Hasbro’s strategies are adaptable and subject to alterations depending on how the tariff situation progresses. The company remains hopeful for a “more predictable and favorable U.S. trade policy environment.” Furthermore, Goetter said, “We’re trying to play both defense and offense at the same time.”