Hasbro pretty much entirely depends on Magic: The Gathering to make a profit
A genuine transformation is taking place at struggling toymaker Hasbro, which on Wednesday morning crushed expectations in its Q1 report.
The massive profitability of the company’s Wizards of the Coast division — which makes Magic the Gathering cards, and the game’s digital spinoffs — drove the results. The division’s sales rose roughly 7% year over year, helping to offset a 21% year over year sales slump in the toy division.
But the real story is the nearly-40% margins of the the Wizards division — where operating profit jumped 60% to $123 million — and accounted for outsized performance of the company on the bottom line.
Meanwhile, the toy division lost $47 million. Thanks to Wizards, the company posted an overall operating profit of $116 million, helping Hasbro more than double Wall Street’s earnings-per-share expectations.
Wizards of the Coast has been in the drivers seat at Hasbro for some time, and the gradual disintegration of the consumer products business has made Wizards an increasingly crucial part of the company’s portfolio.
Magic: The Gathering remains incredibly popular and very lucrative, but the business has had troubles lately. Just last week, WOTC’s president, Cynthia Williams, announced she will be stepping down effective the end of this week. Magic dominates Wizards sales, but it’s also got Dungeons & Dragons, a franchise which has seen sales stumble.
There can also be too much of a good thing: in a widely-publicized 2022 analyst note, Bank of America analyst Jason Haas argued that Wizards risked overproducing Magic cards and undermining the long-term health of the business.
Still, what once was just a niche subsidiary in a portfolio chock full of top-tier brands like Transformers, My Little Pony, and Monopoly has become reliably responsible for pretty much every dollar of Hasbro’s profit. It’s a diminishing toy company along for the ride on a rocketship of a card game.
