Toy maker Hasbro (NASDAQ: HAS) is reducing its global workforce by 3 percent, equating to approximately 150 jobs. This workforce reduction is part of a larger effort to cut costs as the company faces increasing U.S. tariffs on toys sourced from China.

Impact of Tariffs and Market Pressures

With around 50 percent of its U.S. toy and game inventory sourced from China, Hasbro is feeling the impact of rising tariffs. In a recent statement, CEO Chris Cocks highlighted how these tariffs lead to higher consumer prices, potential job losses, and decreased profits. Following a significant cut of 900 jobs in December 2023, the latest cuts underscore Hasbro’s commitment to maintaining profit margins amid the following challenges:

• U.S. Tariffs: New tariffs on Chinese imports have boosted landed costs by as much as 25 percent.
• Weak Demand: Sluggish retail conditions have stressed sales of core toy lines.
• Restructuring Costs: The ongoing multi-year restructuring plan is aimed at streamlining operations and boosting digital growth.

Diversifying Supply Chains

To counteract tariff-related risks, Hasbro is actively exploring options to diversify its supply chain. The company plans to assess logistics routes and manufacturing practices outside of China to lessen the impact of future trade policies.

Restructuring for Future Success

This recent workforce reduction aligns with Hasbro’s multi-year restructuring plan, designed to better align its cost structure with strategic long-term goals:

• Growth in Digital and Licensing: Following stronger-than-expected Q1 revenues, Hasbro is placing greater emphasis on digital gaming and licensed content to attract younger consumers.
• Boosting Operational Efficiency: Roles are being consolidated, and functions centralized to foster quicker decision-making.

Financial Position and Credit Standing

The ability for Hasbro to navigate through these workforce reductions will depend on its financial health. Here are essential metrics to consider:

• Credit Rating: Review Hasbro’s current rating and debt metrics for insights on financial stability.
• Liquidity: At the end of fiscal 2024, Hasbro is reported to have a strong cash position with manageable leverage, allowing it to continue restructuring without threatening its investment-grade status.

Key Takeaways for Investors:

1. Commitment to Cost Control: The ongoing job cuts indicate management’s focus on protecting profit margins.
2. Supply Chain Optimization: Moving away from reliance on China may help stabilize ongoing costs.
3. Digital Growth Focus: Achievements in digital and licensed gaming will be crucial to compensate for the decline in traditional toy categories.

Investors seeking to understand Hasbro’s potential for recovery should closely monitor its financial metrics and credit standing as the company navigates these challenging market conditions.