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Hasbro (HAS +11%) is monopolizing the market today, boasting the top spot within the S&P 500 after crushing earnings estimates in Q1. The company was not toying around when it announced broad restructuring plans in December, cutting around 20% of its workforce amid dismal holiday toy sales and gutting excess inventories.

Management expected the fruit of its more streamlined organization to be gross annual run-rate cost savings of $350-400 mln and resurging growth. While the move sparked a gradual increase in shares of Hasbro, climbing around 20% as of yesterday's close, the market was not anticipating tangible benefits appearing so quickly.

• Hasbro went from posting its widest earnings miss in nearly five years last quarter to its widest beat in 11 quarters in Q1, delivering adjusted EPS of $0.61. Revenue still fell, dropping by 24.3% yr/yr to $757.3 mln. However, this was much better than analysts feared, reversing the company's string of misses.
• Hasbro started the quarter with toy inventories at multi-year lows, down by over half compared to the year-ago period. This hurt Hasbro's Consumer Products segment revenue growth, which fell by 21% and dragged down overall growth. However, it resulted in a significant reduction in closeout volume, leading to a margin benefit, which Hasbro anticipates will continue as it moves through Q2.
• Meanwhile, a more asset-light model entertainment model following the divestiture of eOne Film and TV in December is already paying dividends. Hasbro's Entertainment segment posted soaring revenue growth of 65% yr/yr when removing eOne. Management is enthusiastic about what this segment has in store for the future, including film and FV projects for Clue and a live-action Monopoly movie.
• Looking to FY24, while Hasbro remains excited about its more streamlined business model, it conveyed a cautiously optimistic tone in light of a volatile economic background. Also, the first quarter of the year tends to represent a minor portion of Hasbro's full-year sell-through for toys (Q4 being its most important). Therefore, Hasbro reaffirmed its FY24 guidance, including Consumer Products revenue falling by 7-12% yr/yr and Wizards of the Coast revs down by 3-5%.
  • Management also affirmed that it remains firmly on track toward its gross cost savings by FY25, following the 200-250 mln savings projected for FY24.

Hasbro's Q1 results proved that its quick pivot in December after observing its current strategy failing to produce meaningful results was the correct action. While there are still bumps in the road ahead, finding such outsized success so rapidly reassures investors that management can steer through even the most disastrous climates.