Hasbro is betting it can survive without Toys R Us with help from Fortnite and Facebook

Key Points
  • The company, which was hit hard by the bankruptcy and closure of toy retailer Toys R Us, has been introducing new strategies to right its sales.
  • As shelf space is more limited now that Toys R Us has shuttered, Hasbro is turning to e-commerce instead of brick and mortar locations.
  • Another way for Hasbro to drive sales in 2019 is by working with popular brands like "Star Wars," Marvel and Fortnite.
Brian Goldner CEO of Hasbro
Adam Jeffery | CNBC

Hasbro has been hit hard by the bankruptcy and closure of toy retailer Toys R Us.

Before its bankruptcy filing, Toys R Us was Hasbro's third largest customer in the U.S. and its second largest customer in Europe and Asia. So, Hasbro and rival toy maker Mattel had to scramble to find new retail locations for their products in the wake of Toys R Us' disappearance from the market.

While several retailers, including Target, Walmart, and even drugstores, expanded their toy sections this past holiday season, there were still far fewer shelves showcasing toys in 2018 than in previous years. The loss of shelf space appeared to disproportionately affect Hasbro, especially during the holidays.

In the fourth quarter ended Dec. 31, revenue fell 13 percent to $1.39 billion from $1.6 billion a year earlier.

"2018 was a very disruptive year, driven by the bankruptcy and liquidation of Toys R Us across most of the world and a rapidly shifting consumer and retail landscape," CEO Brian Goldner said in a statement last week.

Since it was announced that Toys R Us would no longer be a major player in Hasbro's distribution plans, the company has been introducing new strategies to right its sales. The company has been working on capitalizing on alternative ways of shopping outside of traditional brick and mortar stores and keying in to trends within the industry, like launching lines of toys based on the popular game Fortnite, executives said at an investor event on Friday.

With these changes, Hasbro hopes to return to the same profitability levels it achieved in 2017, the year before Toys R Us closed, by 2020.

Social media shopping

As shelf space is more limited now that Toys R Us has shuttered, Hasbro is turning to e-commerce instead of brick and mortar locations and increasingly using social media to reach shoppers.

In 2018, Hasbro began using 1-click shopping on social media platforms like Alphabet's YouTube, Facebook and Instagram. The company had "320 shoppable social posts" last year, which allows customers to order products easily online and not have to go to a store.

Hasbro has made a big push on social media over the last few years. In total, the company has more than 10 million subscribers across all of its YouTube channels and more than 27 million followers across its brands on Facebook and Instagram.

These social media platforms are a huge part of the lives of one of Hasbro's biggest demographics of users: children aged three to 12. The company said that 65 percent of this age group uses or owns a tablet and 59 percent of them use or own a smartphone.

As screen time becomes an even bigger part of these young consumers' lives so too will it become a bigger piece of Hasbro's strategy. While these customers may be a little young to buy their own toys, they drive parents to make purchases and will one day be doing the spending themselves.

Hasbro Pulse

Another e-commerce avenue for Hasbro is the newly launched Hasbro Pulse. The website is set to replace as a place for fans of brands like "Star Wars," Marvel and "Transformers" to buy toys and other merchandise.

Hasbro Pulse is a hub for collectors and casual customers to purchase goods but also get a behind-the-scenes look at the company and its products. This platform will have a loyalty program as well as the ability to pre-order highly sought after toys.

Pulse will not replace Amazon, however. Hasbro executives made it clear Friday that the online retailer is still very much a big part of the company's distribution plans.

Last year, Hasbro was the No. 1 toy and game company on Amazon in the U.S. and Canada. Amazon was also the largest customer for sales in Europe in 2018.

Hasbro won't abandon traditional retailers either. The company has plans to continue offering exclusive toys at Walmart and Target to drive traffic to those locations. More and more toy manufacturers are partnering with big box retailers for exclusive toy launches in order to drive up a sense of demand and limited edition with consumers.

For the love of Fortnite

Another way for Hasbro to drive sales in 2019 is by partnering with Walt Disney's "Star Wars," Marvel and even Fortnite to include their brands on its own toys and games.

The online video game has taken the world by storm and children and parents alike are eating up every bit of merchandise that hits traditional and online shelves.

Hasbro's Monopoly brand had its biggest year of sales ever thanks to a Fortnite version of the game, which became the No. 1 Fortnite product of any brand, according to the company.

This year, Hasbro has designed one of its largest collections of Nerf guns ever, all under the Fortnite banner. The company expects these toys to do just as well as the Monopoly set did last year.

As part of this collection, Hasbro is teaming up with US e-sports team TSM, one of the top professional gaming teams in the world to market the line of blasters. The team itself has a fan base of more than 72 million followers across their social media platforms and will act as expert influencers for the brand.

Other brands that will be big moneymakers for Hasbro in 2019 are "Star Wars" with the launch of "The Mandalorian" on Disney's new streaming service later this year and "Star Wars: Episode IX" in December, Marvel with "Captain Marvel," "Avengers: Endgame" and "Spider-Man: Far From Home" and "Frozen 2" due out in November.

Hasbro hopes to tap into the excitement for these upcoming films in order to drive their toy sales this year.