Hasbro Continues To Lay Off Workers Despite Expansion Plans
Tuesday, April 30, 2013
Moving pieces on the board
In 2011, the international toy company, based in Pawtucket, RI announced an expansion into Providence and the promise of creating 281 jobs. Instead, Hasbro laid off 125 employees in the state in 2012 and more than 50 so far this year. The early layoffs began in March of 2012 and have continued. Most current reports have shown job cuts with last days of employment as recent as April 23, 2013. These job cuts occurring well into the second quarter of 2013 suggest that they may continue. In May of 2012 the company said it was reorganizing its gaming division by relocating 70 jobs from East Longmeadow, MA to Rhode Island and laying off another 75 Massachusetts workers.
Hasbro said that fourth-quarter 2012 profits dropped because of lower than anticipated demand in the U.S. and Canada and slow sales of games and puzzles during the holiday shopping season. In a February 2013 interview with Examiner.com, CEO Goldner said, “In 2012, we met many of the objectives we set for Hasbro. Based on preliminary results, we returned the U.S. and Canada segment to historical operating profit levels; we grew revenues in the Games category against our 2012 objective of stabilizing revenues; and we grew revenues in our Girls category. We also experienced double digit growth in our emerging markets business and achieved profitability in most major emerging markets a year ahead of our plan.”
The EDC rolls the dice
The Rhode Island Economic Development Corporation, headed by Governor Chafee, approved the $1.6 million tax credit proposal in 2011. The state's incentive program calculates the size of the tax break based on the projected income tax revenue to be generated by new jobs. Only jobs paying salaries higher than the state median wage qualified for the program. However, by the end of 2012, full year revenues had declined by 2% in spite of “restructuring” initiatives. Since then, Standard & Poor’s credit watch reduced the company’s rating to BBB+, reporting it reflected a decline in operating performance through the holiday season in 2012.
According to Wayne Charness, senior vice president of corporate communications at Hasbro, “Our agreement with the State is contingent upon Hasbro meeting certain hiring requirements (281 employees) by 2014, if we meet those requirements, we will apply for the $1.6 million in tax credit incentives from the State. If we do not meet them, then we won’t apply.” He did not refute the numbers of “restructuring” layoffs as presented to him.
Mark Gray, Director of Ocean State Action’s “Where’s the Work” campaign said “Giving $1.6 million to Hasbro--or any company--for job creation only to end up with further job losses highlights the need for this kind of tax expenditure oversight.” For the record, no money has actually been given to Hasbro. Rather, the proposal was approved under conditional circumstances. However, Gray went on to emphasize the need to focus less on incentivizing large businesses and shift that focus to small business. He went on to say, “Rhode Island is clearly still stuck in the depths of an unemployment crisis. We need a comprehensive jobs bill, plain and simple. Right now the closest thing to that at the General Assembly is Representative Handy's and Senator Satchell's jobs bill(s) (H5815, S401) that would establish a program of grants to small businesses to partially subsidize the cost of hiring and training unemployed workers.”
Playing the numbers game
According to Hasbro’s report on growth for 1st quarter, 2013 released on April 22nd, 2013, net revenues increased 2% to $663.7 million for the first quarter of 2013 versus $648.9 million for the 1st quarter 2012. The US and Canada segment is up 4%. The international segment remained flat. The entertainment and licensing segment is up 5%. Much of this has been attributed to “cost saving initiatives.” The company is undertaking said initiatives to better align resources and costs while targeting $100 million in annual savings by 2015.
In spite of recent upticks in revenues, layoffs have continued; a sign that restructuring continues. However, according to URI Economics Professor, Leonard Lardaro, “… as a publicly traded company, they will often have to respond to things well beyond whatever deals they might have with the state of RI.”
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