Toymaker Hasbro (HAS) lays off close to 20% of its workforce to balance out the impact of weakening toy sales, according to a memo from CEO Chris Cocks. Yahoo Finance anchors Brad Smith and Seana Smith comment on trends in the retail toy category and how employers are leveraging lay offs to offset economic headwinds.

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This post was written by Luke Carberry Mogan.

Video Transcript

[AUDIO LOGO] BRAD SMITH One mover that we're watching today, Hasbro the toy maker slashed nearly 20% of its workforce amounting to 1,500 employees, as the holiday shopping period highlights a weaker market for toy sales.

In a memo obtained by Yahoo Finance, Hasbro CEO told employees, "While we see workforce reductions as a last resort, given the state of our business, it's a lever we must pull to keep Hasbro healthy."

We've been keeping tabs on Hasbro shares this morning, and continuing to ultimately really weigh what some of these cuts that have come forward towards the end of the year, whether they be for some of the restructuring ahead of what we've discussed with economists, any fears that CEOs may have of a recession, or just more pertinent to their industry, what type of pullback they're seeing.

And spending and toys is one of those categories where, for Hasbro, it's been a tale of two different cities versus Mattel in the year that Mattel has had with all the fanfare around Barbie, whether that be content, whether that be licensing, whether that be the toys and figurines that people are buying into.

All of that considered, Hasbro has talked about a pipeline that it has going forward, especially thinking about the Wizards category, but at the same time, looking across the workforce and ultimately having to make this decision prior to some of those other projects, both on the production and licensing side coming to fruition.

SEANA SMITH: Yeah.

And you mentioned the discrepancy here, the difference we're seeing in terms of the performance of Hasbro versus Mattel.

Yes, they are both lower here this morning ahead of the open.

But when you take a look at those year-to-date performances, that's where you're going to see a difference.

Mattel shares still in the green for the year, up just about 6%.

But you're comparing that to a 20% decline in Hasbro stock.

So we're seeing some underperformance there from Hasbro.

Not necessarily a massive surprise, these layoffs.

We know Hasbro, in their most recent quarter back in October, did hint to the fact that there was some trouble here for the company.

They slashed their profit outlook for the year.

They're now expected to see 13% to 15% revenue decline for the entire year.

So yes, toy sales have been sluggish.

They have been struggling now for quite some time.

Consumers under a tremendous amount of pressure.

They're being forced to make some of these tough decisions like not spending on toys.

And as a result, a number of companies are suffering.

And you're seeing Hasbro making that tough decision here with announcing the fact that it's going to slash nearly 20% of the workforce.

But Brad, I also want to get to the point that this is part of a broader narrative that we're starting to see play out here as we enter in or get ready for the end of the year.

A number of companies have come out in recent weeks talking about layoffs, plans to announce layoffs, or they are announcing layoffs here ahead of the end of the year.

And also EY out with some news here this morning saying that they are going to be cutting more jobs here in the US amid a very challenging economic environment here for the company.

Some of those layoffs are going to include more partners than usual.

Now, this is something that we've seen from some of the other big four, other consulting firms out there in the street.

KPMG laid off staff over the summer.

It was nearly 2% of the US staff earlier in the year, as well.

Deloitte also cutting some of its staff.

So what we're seeing here from EY and more broadly speaking, some of these layoffs here ahead of the end of the year.

Companies are really trying to right-size to better position themselves as you look ahead to a very uncertain 2024.

BRAD SMITH Yeah, and that uncertainty weighs on the prospects for deal making, too, at the end of the day.

And those consultants very much present within those deal-making conversations, and ultimately coming off of this year in 2023 where we've seen a major slip up in the amount of M&A activity.

I think that's one area where, of course, EY is going to be impacted, as well, and making some cuts to try and get ahead of that.