Hasbro is a leading toy, game and entertainment company with global reach. During the early stages of the COVID pandemic, prior to the start of the Class Period, Hasbro faced an increase in demand as families locked down in their homes, and global supply chain disruptions impacted numerous industries. In response, Hasbro overpurchased inventory to ensure that it could meet demand.
The complaint alleges that, throughout the Class Period, Defendants made numerous materially false and misleading statements and omissions about the quality inventory that Hasbro held, and represented that its rising inventory levels reflected outstanding and anticipated demand, rather than excess supply that outpaced waning demand. As a result of these misrepresentations, Hasbro common stock traded at artificially inflated prices throughout the Class Period.
In truth, Defendants knew that Hasbro had overpurchased inventory to an extent that significantly outpaced customer demand. The truth began to emerge on January 26, 2023, when the Company previewed its fourth quarter results for fiscal year 2022. Hasbro, having repeatedly touted the apparent strength of the 2022 holiday season, now admitted that revenue would contract by 17% year-over-year. To combat weakening sales, Hasbro announced it would be laying off 15% of its global work force, and at the same time disclosed the immediate departure of its Chief Operating Officer. These disclosures caused the price of Hasbro stock to decline by $5.17 per share, or over 8%. However, Defendants continued to make false, reassuring statements to investors concerning the extent of the inventory buildup.
The truth was further revealed on October 26, 2023, when Hasbro announced its financial results for its fiscal year 2023 third quarter and shocked investors by disclosing an 18% decline in Consumer Product revenues year-over-year, along with a significant reduction in guidance for the remainder of the year. Hasbro also revealed that it was forecasting “$50-ish million of onetime cost” that was to be spent on “mov[ing] through inventory at the retailer level, extra marketing to move through the inventory, [and] extra obsolescence cost” in its Consumer Products segment. These disclosures caused the price of Hasbro stock to decline by another $6.38 per share, or over 11%.
