No toying around in the market for Hasbro ( HAS ) shares on Thursday.
Shares of the toymaker exploded 11% after the company smashed through fourth quarter profit estimates and offered upbeat longer-term guidance.
The Street gave Hasbro high marks for aggressive cost-cutting, which has more room to go — CEO Chris Cocks told me on Yahoo Finance the company aims to slash $1 billion in costs by 2027. Its previous goal was $750 million.
Cocks said the toy industry has bottomed out after a few challenging years.
"The toy category has been down, kind of like low single-digit percentage [drop] per year for the last three years. We see that starting to flatten out and basically being flat for the next two to three years. We think Hasbro will benefit — we've got a great innovation portfolio coming out."
Q4 earnings rundown
2025 outlook
New guidance through 2027
Earnings analysis
Toy stocks have done surprisingly well in 2025 despite tariff news swirling. Shares of Mattel ( MAT ) and Hasbro are up 22% and 18%, respectively, year to date. But tariff headwinds are likely coming for each toy giant's financials and stock price.
President Trump has pledged to implement reciprocal tariffs pending an April 1 report from Commerce Secretary Howard Lutnick. The premise is that the US would raise its tariffs on foreign items to match what other countries slap on US products.
Read more: What are tariffs, and how do they affect you?
The administration has already put an additional 10% tariff on Chinese imports, while a 25% tariff on Canada and Mexico is on hold.
That could materially impact consumer companies as a sizable portion of their merchandise is sourced from China due to its low production cost. But tariffs could also stunt demand as consumers balk at price hikes.
Trump's tariffs could reduce American consumers' spending power by $46 billion to $78 billion every year they are in place, estimates the National Retail Federation (NRF).
Nearly 80% of US toys are manufactured in China, according to industry trade group the Toy Association.
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"Our teams have been fully engaged in analyzing and planning for a range of scenarios. And in terms of the financial impact on Mattel, our 2025 guidance includes the anticipated impact of the new tariff based on what we know today and mitigating actions we plan to take, including those leveraging the strength of our supply chain and potential pricing," Mattel CFO Anthony DiSilvestro told investors on an earnings call earlier this month.
Hasbro's Cocks said the company is ready to raise prices to offset tariff pressures.
"I think a lot [of how 2025 holidays will play out] depends on how the whole tariff scenario plays out. When we look at the current kind of guidance that we've given, which factors in the 10% on China tariffs, pricing will be a variable that we play with, but I think it will be very targeted," Cocks explained.
"In general, our focus is to bring more value and more products at sub $10 and sub $20."
The company makes Magic the Gathering cards in North Carolina and Texas, while board games are made in Massachusetts.
Bringing more toy manufacturing onshore beyond that would be tough, said Cocks.
"I think the challenge with manufacturing a lot of toys like action figures and kind of like higher-turnover toys is it tends to be those toys are very manual to create, and they also tend to have a fair amount of turnover [in design] ... It's a fast fashion category. So I think bringing back manufacturing jobs to the US would require us to do very heavy automation, and it would be a pretty heavy lift and take multiple years," Cocks added.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi , Instagram , and LinkedIn
