By Jennifer Williams

Hasbro is beckoning teens and adults to come out and play.

More mature customers -- the toy industry calls them "kidults" -- increasingly have a desire to tinker and feed their nostalgia. They are shelling out hundreds of dollars for intricate Lego sets, scouring store aisles for plush Squishmallows and Jellycats, and matching their outfits with American Girl dolls. These are lucrative trends as adults scooping up playthings tend to spend more money and buy more frequently than when the toys are for children.

Already, roughly 60% of Hasbro's revenue comes from people who are 13 and over. Now, in the midst of a yearslong turnaround effort that has involved cutting $600 million in costs and over two-thirds of its individual products, Hasbro is pinning growth on adults and teens interested in Star Wars fighter vehicles, Spider-Man action figures and other toys and collectibles, while working to limit the impact of tariffs.

"We believe that demographic has more spending power and sticking power, " Hasbro finance chief Gina Goetter said. "As we thought about where we are investing for growth, it is in all of the businesses that are more exposed to that trend."

That includes digital games like "Monopoly Go!" and role-playing and trading-card games, such as "Dungeons & Dragons" and "Magic: The Gathering." It also includes toys, which Hasbro expects to drive much of its margin expansion this year.

Postpandemic shift

Demand for toys declined in recent years as inflation-weary consumers pulled back on the buying they did to entertain themselves and children during the pandemic. Hasbro's revenue has been down for 10 consecutive quarters, dropping 15% to $1.1 billion for the quarter ended Dec. 29, compared with a year earlier. The sale in late 2023 of the eOne film and television business diminished Hasbro's revenue throughout last year and accounted for much of the shortfall for the latest three-month period. Without it, revenue was down just 3%.

In response to the tepid demand, Hasbro has cut costs, saving hundreds of millions of dollars through supply-chain efficiencies and by purging unprofitable products. The company has cut 80% of its stock-keeping units, or SKUs, over the past several years -- items that represented between 2% and 3% of Hasbro's revenue, said Goetter, who is also Hasbro's chief operating officer.

The U.S. toy market is stabilizing, with sales flat last year compared with a 7% decline in 2023, according to research firm Circana. After shedding unprofitable items, Hasbro sees room for additional savings by improving the process to design and develop certain products. The company is also looking closely at costs, including the money retailers get to sell and promote Hasbro wares. Hasbro increased its cost-cutting goal last month to $1 billion by 2027, up from a target of $750 million in gross savings by the end of this year.

Roughly half of the cost cuts go to improve Hasbro's bottom line, Goetter said. The rest are invested in everything from marketing to upgrading products and creating new ones. Next year, Hasbro will release its first videogame developed and published in-house, following successful digital partnerships like the one that created "Monopoly Go!."

Even so, toys are in focus now. Although margins are thinner for toys than digital products, Hasbro expects toys to account for most of its margin growth in the near term because of limited releases of some digital offerings, such as a "Dungeons & Dragons" game.

The plan to draw teens and adults includes playing up existing brands that they already favor, such as Star Wars and Furbys. It also means finding new temptations.

One of the latest is a collaboration with Mattel's Barbie that allows people to outfit their dolls with Play-Doh skirts and tops. "Young girls will be attracted to it," Goetter said. "But the trend was actually started by teenagers and adults making fashion out of Play-Doh."

There are limits to the kidult-centered strategy, analysts said. The older crowd tends to prefer specific Hasbro offerings like collectibles and videogames, said Jaime Katz, a senior equity analyst at Morningstar.

But the focus overall makes sense, she said. "You'd rather appeal to everybody than to just people under 13," according to Katz. "It opens up the aperture of the total addressable market in a different way than maybe these companies have traditionally been thinking about."

Tariff impact

Looming large over all toy makers, including Hasbro, is how tariffs imposed by the Trump administration will hit efforts to sell more toys and games.

Roughly 50% of Hasbro's U.S. toys and games come from China, a target of the tariffs, but the company is working to bring that down to under 40% over the next two years. Making the shift means finding the infrastructure and labor in new locations such as Vietnam, India and Indonesia, which Goetter said can take anywhere from one to two years.

Hasbro might increase consumer prices to offset the tariffs, though Goetter said the specifics are still up for discussion. "It's very fluid, " she said.

Shoppers might spend less if prices go up, analysts said. But the toy industry tends to be a bit more insulated from pushback over higher prices. One reason: It is hard to compare prices from year to year because most toys on shelves are new or upgraded from the year before.

Another reason is that toy companies can lift prices without going over critical thresholds, which in this industry are generally considered to be $5, $10 and $20, said Jefferies analyst Kylie Cohu. Executives have to be strategic with any increases, but an action figure going from $6.99 to $7.99 still works for the consumer looking to spend $10 or less, she said.

For Hasbro, tariffs might mean further pruning its list of products, cutting those that don't make sense after factoring in any new import taxes, according to Goetter, the chief financial officer. The levies also threaten to disrupt recent progress across toy businesses, she said.

"The broader industry was finally reaching a stable point, coming off of the highs of Covid, then coming down," she said. "Now here come the tariffs."

Write to Jennifer Williams at jennifer.williams@wsj.com

(END) Dow Jones Newswires

March 14, 2025 06:00 ET (10:00 GMT)

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