Hasbro reported a tough Q1 on Monday, with a sales decline of over $133 million from the same quarter a year ago, and a $59.1 million write-off of debt from Toys ‘R’ Us that will never be paid (see “Toys ‘R’ Us Closing All US and UK Stores”). The bad debt is 100% of the amount owed at the time of the filing last fall, which means that product shipped through the holidays and Q1 was all on a COD or prepaid basis. The sales decline wasn’t all due to Toys ‘R’ Us; the company has problems in Europe, which it said last quarter were primarily due to Brexit.

Hasbro lost $112.5 million in Q1 vs. a $68.6 million profit in the year-ago period.  Getting out as much bad news in the quarter as possible, the loss included not only a total of $61.4 million in costs associated with the Toys ‘$’ Us shutdown in the U.S. and the U.K. (mostly the bad debt mentioned above), it also included $15.7 million of severance costs associated with the company’s “commercial organization transformation” (which translates as relying less on sales in stores and more on e-commerce sales), and a $47.8 million charge due to the U.S. tax bill.

Hasbro’s gaming sales, including its “franchise brands” Monopoly and Magic:  The Gathering, were down 20% in Q1 to $203.5 million, compared to $253.3 million in Q1 2017.

Magic:  The Gathering sales were down for the quarter as anticipated, Hasbro CEO Brian Goldner said in the conference call, with lots of early interest in Dominaria (which had successful pre-releases last weekend, see “Four Noteworthy Things about the ‘Dominaria’ Pre-Release”), and Magic: The Gathering Arena doing well in closed beta.

There were lots of questions in the conference call about the Toys ‘R’ Us bankruptcy, and there were a few key takeaways: 

• Hasbro believes it has fully accounted for the bad debt, so direct costs from here on out will be limited, but sales impacts are expected to continue into 2019. 
• The company said it had held back initiatives at retail for Q1 and Q2 so they would not have to compete with the Toys ‘R’ Us liquidations.
• The U.S. and UK stores, which are the only ones closing at this point, account for roughly 2/3 of Hasbro’s sales through the chain.
• Hasbro has added 21,000 doors over the past three years, helping to give it more places to sell its products as the Toys ‘R’ Us stores close.
• Other major retailers are expected to add space for Toys ‘R’ Us categories to pick up some of the volume from the bankrupt chain.