Dive Brief:

• Hasbro says the elevated transit costs that the company has faced for months are beginning to drop, a trend the toymaker expects to continue into the fall.  
• The company implemented price increases at the beginning of the quarter, which helped offset the higher product and freight costs, CFO Deborah Thomas said in the Q2 earnings call. Thomas noted that the price hikes will be increasingly impactful in the second half of the year.
• Port congestion delays are also beginning to ease, a good sign for Hasbro as it prepares for its holiday sales push, Thomas said. The company expects it will end 2022 with inventory levels near what they were last holiday season.

Dive Insight:

Despite the logistics improvements, ocean freight costs continue to weigh on Hasbro.

While lead times have gone down, they remain “two times higher than historical levels,” Thomas said. Overcrowding at cargo ports and shipping container and truck transportation constraints have led to higher costs for ocean, air and over the road freight, according to the company’s most recent quarterly report.

Freight costs were up to $62.1 million on June 26, 2022 compared to $34.2 million a year ago. “These and other disruptions are expected to continue throughout 2022,” the company said in its report.  

Competitor Mattell faced similar obstacles over the last quarter, including the negative impacts of heightened ocean freight costs, CFO Anthony DiSilvestro said during the company's July earnings call. Like Hasbro, retailers placed earlier orders with the toy manufacturer to ensure supply ahead of the holiday season.

Heightened ocean shipping costs are one of several supply chain challenges Hasbro has faced over the past year, including container shortages and temporary plant shutdowns.

However, Thomas said the company is better prepared to weather supply chain issues thanks to earlier inventory purchases.

Hasbro was also aided by a move from retailers to shift shipment of some consumer-direct products from the second to third quarter. Retailers increased their direct import orders by approximately $60 million in the second quarter.

“Importantly, we proactively managed our supply chain and inventory purchases to mitigate disruption,” CEO Chris Cocks said on the earnings call. “We're much better positioned to meet demand this year versus last.”