Weak holiday toy sales continue to impact Hasbro, resulting in the company laying off 1,100 workers.

• As toy sales decline, Hasbro announced it would lay off 1,100 employees, according to a company memo.
• Earlier this year, the company, which produces Transformers and My Little Pony toys, had already reduced its workforce by approximately 800 jobs.

The toy maker is laying off approximately 1,100 employees due to soft sales that have persisted throughout the holiday shopping season, according to a company memo obtained by CNBC.

According to a company fact sheet, Hasbro had approximately 6,300 employees earlier this year.

On Tuesday, the company's stock dropped over 2%, while Mattel's stock also experienced a decline.

CEO Chris Cocks stated in a memo that the first three quarters were expected to be challenging, particularly in the Toys division, where the market is experiencing historic, pandemic-driven highs. Despite making some progress across the organization, the headwinds seen through the first nine months of the year have continued into the Holiday season and are likely to persist into 2024.

Hasbro, which had previously laid off hundreds of employees and warned of trouble in October, recently reported a 13% to 15% revenue decline for the year in its most recent quarterly earnings report.

In the October quarterly report, Hasbro announced a significant drop in sales of popular toy brands. The decline was attributed to "softer category trends," which affected brands like My Little Pony, Nerf, and Transformer, which fell 18% in sales.

Nearly 20% of Hasbro's stock dropped by Monday's close.

Despite Hasbro competitor Mattel's warning of soft sales, Mattel's stock has risen approximately 6% through Monday, largely due to the success of the film "Barbie." However, this is still below the 17% increase in the S&P 500 so far this year.

Consumers may have noticed lower discounts on toys this holiday season compared to the previous year, which could have contributed to a tepid overall performance for retailers.

Read the full memo from CEO Chris Cocks:

Team,

Since the launch of our strategy to focus on building fewer, bigger, better brands, we have experienced significant progress in areas such as supply chain optimization, inventory management, cost reduction, and reinvestment of over $200M. However, the market headwinds we anticipated have proven to be stronger and more persistent than expected. Despite our confidence in the future of Hasbro, the current environment requires us to take additional measures, which may be difficult decisions.

We are announcing further headcount reductions as part of our strategic transformation, which will affect approximately 1,100 colleagues worldwide, in addition to the previously announced 800 reductions.

After careful consideration and extensive deliberation, our leadership team has made a challenging decision. We understand that this news will have a significant impact on the lives of our friends and colleagues. Our top priority is to communicate with you openly and provide support during this time of transition. To begin, let me explain the reasons behind our decision and what we plan to do next.

Why now?

We entered 2023 with the expectation of undergoing significant changes in our leadership team, structure, and operations. We anticipated that the first three quarters would be challenging, particularly in the Toys market, where the market is experiencing historic, pandemic-driven highs. Despite making some progress across our organization, the headwinds we faced in the first nine months of the year have continued into Holiday and are likely to persist into 2024.

To ensure the growth of Hasbro, we must first focus on strengthening our foundation and maintaining profitability. This requires modernizing our organization and streamlining our operations. Although reducing our workforce is not our preferred option, given the current state of our business, it may be necessary to maintain the health of Hasbro.

What happens next?

Some functional areas will be impacted more than others during the changes being made across the organization. Those whose roles are affected will be informed in the next 24 hours, with timings varying by country and subject to local rules and employee consultations where necessary. This includes team members who have opted to step down from their roles at the end of the year as part of our Voluntary Early Retirement Program (VRP) in the U.S. We thank these colleagues for their many years of service and wish them all the best.

Over the next six months, the majority of notifications will occur, with the remaining balance happening over the next year as we continue to work on our organizational model. This includes standardizing processes within Finance, HR, IT, and Consumer Care as part of our Global Business Enablement project, as well as doing more work across the entire business to streamline management layers and create a more agile organization.

What else are we doing?

During the holiday season, receiving difficult news can be challenging. However, we prioritize the well-being of our team members and consider them more than just employees, but friends and colleagues. In light of this, we have chosen to communicate the changes now to allow individuals time to plan and cope with the changes. To support those affected, we are providing comprehensive packages that include job placement assistance to facilitate a smooth transition.

We have minimized the scale of impact by launching the VRP and exploring options to reduce our global real estate footprint. However, our Providence, Rhode Island office is not being used to its full capacity, so we have decided to exit the space at the end of the lease term in January 2025. Over the next year, we will welcome teams from our Providence office to our headquarters in Pawtucket, Rhode Island. This is an opportunity to reshape our workspace and ensure it is vibrant and productive, while reflecting our more flexible in-person cadence since the pandemic.

Looking ahead

Gina frequently emphasizes that cost-cutting is not a viable approach. Despite this understanding, we will persist in expanding and allocating resources to multiple sectors in 2024.

By discovering additional cost savings, we will invest in new technology, data analysis, product innovation, and digital strategies, while maintaining our dominant franchises and enhancing our brands' marketing efforts for long-term success.

Our new supply chain efficiency, direct-to-consumer capabilities, and key partnerships will help us unlock potential across our business, maximize licensing opportunities, scale entertainment, and free up our own content dollars to drive new brand development.

Let's work together to overcome the challenges and support each other through the changes necessary for our business to grow and fulfill Hasbro's mission. We appreciate the contributions of our employees and wish them all the best.

Thanks,

Chris

–CNBC’s Claudia Johnson contributed to this report.