Hasbro/WOTC Earnings Call Impacts Of Tariffs and More

In a surprising turn of events amidst widespread concerns over escalating tariffs, Hasbro has announced an increased financial outlook for its Wizards of the Coast and Digital Gaming segment. This optimistic revision comes on the heels of a stellar first quarter in 2025 and robust pre-orders for highly anticipated Magic: The Gathering releases.

While many industries grapple with the highest tariff levels seen since the Great Depression, Wizards of the Coast (WotC), the powerhouse behind Magic: The Gathering and Dungeons & Dragons, appears remarkably resilient. During their recent earnings call, Hasbro revealed that WotC anticipates a relatively modest tariff impact of approximately $10 million for the entire year. This limited exposure is largely attributed to the fact that key Magic: The Gathering products are primarily sourced within the United States (North Carolina and Texas) and Japan (Kyoto). The majority of the anticipated tariffs stem from Dungeons & Dragons box sets manufactured in China.

Hasbro CEO Chris Cocks emphasized WotC’s strategic intent to maintain current price points, particularly for core Magic: The Gathering offerings. Furthermore, Hasbro believes its overall exposure to tariffs is lower compared to many competitors, presenting an opportunity to potentially gain market share during this period of economic uncertainty.

The first quarter results paint a clear picture of WotC’s current strength. The segment witnessed an impressive 46% surge in sales, climbing from $316.3 million in Q1 2024 to $462.1 million in Q1 2025. Magic: The Gathering led this charge with a remarkable 45% growth, increasing from $237.9 million to $346.3 million, demonstrating strength across both its tabletop and digital Arena platforms.

Cocks highlighted several factors contributing to this Magic growth, with strong sales of older card sets  being a primary driver, alongside the introduction of additional product variations like Innistrad Remastered. The tabletop gaming division within WotC, encompassing both Magic and D&D, also saw significant growth, up 51% year-over-year.

Looking ahead, Hasbro’s increased growth forecast for the WotC division, now projected in the mid- to high-teens, is fueled by strong advance orders for upcoming Magic: The Gathering releases. These include the eagerly awaited Tarkir: Dragonstorm and, notably, the Universes Beyond sets featuring iconic franchises like Final Fantasy, Marvel, and Avatar: The Last Airbender. In a significant announcement, Cocks confirmed that the Final Fantasy set is on track to become the best-selling Magic: The Gathering set of all time based on current order volumes, with this milestone likely to be reported during their Q4 earnings call.

The profitability of the Wizards of the Coast and Digital Gaming segment in Q1 was equally impressive. The division generated an operating margin of approximately 50%, translating to a substantial $230 million in operating profits, a significant jump from the $122.8 million reported in the same period last year.

Adding to the positive momentum, WotC has experienced substantial growth in its network of local game stores, with store counts increasing by 20% over the past 18 months. This trend aligns with reports of trading card shops shifting their focus towards the trading card game (TCG) market, potentially due to concerns about disruption in the sports card industry.

While Wizards of the Coast shines, the broader Hasbro picture reveals a more nuanced situation. Company-wide sales saw a 17% increase in Q1 2025, reaching $887.1 million. However, the Consumer Products segment, which includes traditional toys and mass-market games, experienced a 4% decline, although Hasbro noted this was better than anticipated.

Interestingly, the robust profits generated by WotC appear to be somewhat offsetting challenges in other parts of the business. While Hasbro’s overall earnings of $98.6 million in Q1 2025 represent a healthy increase from $48.2 million in Q1 2024, it is less than half of the operating profit generated solely by the Wizards of the Coast segment.

Despite manufacturing some mass-market board games domestically in Rhode Island, Hasbro’s toy business faces considerable tariff exposure. In response, the company is accelerating its efforts to reduce the number of product variations (SKUs) and shift manufacturing away from China to other countries.

In a stark assessment of the potential impact of prolonged tariffs, Hasbro anticipates a similar negative effect on consumer spending for toys as was observed during the Great Recession of 2008-2009.

“Ultimately, tariffs translate into higher consumer prices, potential job losses as we adjust to absorb increased costs and reduced profits for our shareholders,” Cocks stated during the conference call. “Our guidance is unchanged, supported by our robust games and licensing businesses and our strategic flexibility. But prolonged tariff conditions create structural costs and heighten market unpredictability.”

Despite these broader economic concerns, the strong performance and optimistic outlook for Wizards of the Coast offer a bright spot for Hasbro. The enduring popularity of Magic: The Gathering, coupled with strategic sourcing and highly anticipated new releases, positions the segment to continue its impressive growth trajectory, even in the face of challenging global trade conditions.