Gina Goetter
Executive Vice President & Chief Financial Officer at Hasbro
Thanks, Chris, and good morning, everyone. As Chris laid out, we delivered a solid quarter with revenue coming in ahead of expectations and proof points emerging across several of our transformation initiatives. We also announced the sale of the eOne film and TV business, a step that simplifies our strategy and our focus on toys and games. As we look to the quarter, total Hasbro revenue of $1.2 billion was down 10% versus last year, as we continue to see normalization of inventory, lap the exit of certain licensees and markets within the Consumer Product segment, and we had fewer planned releases for Wizards of the Coast. The Entertainment segment revenue was down 3%, primarily due to the exit of non-core businesses in 2022. Excluding these divestitures, the film and TV and Family Brands businesses were up 5% versus prior year.
Adjusted operating profit of $137 million was down 43% versus last year. In addition to the revenue decline, we incurred higher inventory closeout costs as we continue to rightsize inventory back to healthier levels. Profit was also negatively impacted by an impairment taken on DUNGEONS & DRAGONS: Honor Among Thieves as a result of box office results coming in below expectations. Adjusted earnings per share of $0.49 was 57% below last year due to the factors noted and includes unfavorable impacts related to taxes and interest expense. The adjusted results exclude the impact of a $296 million film and TV impairment. Through the second quarter, the ongoing writer and actor strikes had minimal impact on our results. However, as the strikes continue, our 2023 outlook for entertainment has come down. The adjusted results also exclude incremental costs attributed to the Operational Excellence program, and amortization associated with the eOne acquisition.
Looking at year-to-date results. Revenue of $2.2 billion was down at 12% below last year, driven by declines in the Consumer Products segment and planned timing shifts across entertainment. Wizards segment revenue is down slightly versus prior year. as a result of launch timing and having one fewer release in the front half of this year compared to 2022. Adjusted operating profit of $184 million was down 52% versus last year, as we continue to incur higher costs associated with clearing inventory as well as absorb the impact from the D&D film impairment. Year-to-date adjusted EPS is $0.49, driven by the factors noted above. Looking at our brand performance. Our Franchise Brands were down 5% in the quarter and year to date. These brands represent our biggest and most profitable brands and are just over 60% of our revenue. Within Franchise Brands, we delivered significant Q2 revenue growth in TRANSFORMERS and DUNGEONS & DRAGONS, driven by the uplift from the movie releases.
Additionally, PEPPA PIG grew as a result of growth in entertainment and digital gaming. Our partner brand revenue is down 21% for the quarter. More than 60% of the loss as a result of the licenses we exited at the end of last year. Sales of Hasbro products for Spider Man by Marvel are up with an over 100% increase in POS since the release of Spider-Man: Across the Spider-Verse, and further supported by the preschool series and new product releases. Partner Brands continue to play a vital role in our portfolio for kids, fans and retailers around the world. Across our portfolio brands, the declines are driven by the reprioritization of investment to support the franchise brands, as well as discontinuances across the retail footprint. However, one of our relaunched portfolio brands, Furby, is off to a promising start. Looking at operating margin. Second quarter adjusted operating margin of 11.3% was 670 basis points below last year. The single biggest impact in the quarter is the volume decline in mix of business.
Through the first half of the year, we prioritize cleaning up the portfolio and reducing inventory levels across the CP business, resulting in higher-than-normal closeout costs. Also, as planned, we had one less MAGIC release within the Wizards segment, which created an unfavorable mix and fixed cost absorption impact. Additionally, as we shifted to leverage licensed IP within Wizards, we incurred higher royalty expense, resulting in a 1.7% margin point loss. Momentum is accelerating in our cost savings program. And year-to-date, we have accumulated $32 million of gross cost savings within supply chain, and an additional $52 million of gross cost savings within operating expense. The combined $84 million of gross savings are more than offsetting cost inflation and have allowed us to reinvest back into the business to support higher levels of marketing spend, fund our inventory reduction efforts and fuel key strategic initiatives required to deliver our long-term targets.
Cumulatively, since we began the savings program in 2022, we have reduced our cost base and delivered gross savings of $104 million. And we remain on track to deliver our in-year savings goal of $150 million. And finally, to round out the margin drivers, we had a negative 280 basis point impact in other items, which includes the $25 million impairment on the D&D film. As Chris mentioned, we made significant progress in lowering inventory levels. We reduced total owned inventory 16% versus prior year, primarily driven by a 24% reduction in the Consumer Products segment inventory. We expect to see inventory reduction through the first part of Q3 and stabilizing to more normalized levels by the end of the year. From a retail inventory perspective, their inventory was also down 16%, and the lion's share of the directions are behind us.
Looking more closely at segment performance within the quarter, Wizards of the Coast and Digital Gaming segment revenue was down 11%. Overall tabletop gaming revenue, which includes both MAGIC and D&D, declined 17% given the release timing. The decline in tabletop was partially offset by 33% growth in digital gaming, including the addition of D&D Beyond, which we acquired last May, and growth in Arena. Segment margins declined in line with expectations driven by higher royalty expense and a step-up in investment to support future brand growth and product development. Moving to the Consumer Products segment. Total CP revenue was down 11% in the quarter, driven by declines in POS trends and the focus on clearing inventory. Looking at the key drivers for the quarter. Five points of the decline was driven by planned license exits. Another 3-point decline was driven by toy and game volume given the broad category trends and retailers taking a more focused approach with their inventories. Four points of decline came from pricing and mix, driven by additional closeout costs as we work through higher inventory levels.
And finally, we achieved one point of growth from licensed consumer products as we reenergized focus on leveraging our IP across categories. In the quarter, the Entertainment segment declined 3%, primarily due to business exits late last year. This was partially offset by 3% growth in film and TV behind scripted TV growth as well as film revenue from DUNGEONS & DRAGONS: Honor Among Thieves. In addition, Family Brands revenue increased 14% and driven by content sales, including for PEPPA PIG. The adjusted operating loss for the second quarter includes the $25 million Dungeon & Dragon: Honor Among Thieves production asset impairment charge. Today, we announced the sale of our eOne Film and TV business to Lionsgate. Overall, the business that we're selling represented approximately 85% of the revenue and just over 60% of the adjusted operating profit of the total Entertainment segment last year.
Wrapping up with Hasbro, Inc., we delivered $119 million of operating cash year-to-date, which is $29 million behind last year, driven by lower receivables coming out of 2022. Through June, we repaid $91 million of long-term debt and spent $112 million on capital expenditures, led by investments in Wizards of the Coast for future digital gaming releases. And we've returned $194 million of capital to our shareholders via dividends. In the quarter, we booked a 26.3% underlying tax rate, which compares to 21.6% in Q2 of last year. The higher rate is driven by our entertainment business losses and higher withholding taxes plus a shift in the geographical mix of income. Additionally, we had $4.8 million of additional interest expense due to higher interest rates. Turning to our 2023 guidance. The outlook across the Consumer Products segment remains on track and Wizards of the co-segment is better than original expectations. For the Entertainment segment, we are updating guidance to reflect the reality of the writers and actors strikes on our eOne film and TV business.
This updated guidance assumes film and TV is included for the entire fiscal year, and we will update once the close is complete. Based on this, we now expect total Hasbro Inc. revenue down 3% to 6%. As we look at the three primary segments, this guidance continues to assume that the CP business will be down mid-single digits, which is consistent with our initial outlook. We are planning for POS trends to continue stabilizing in the back half of the year, and this coupled with stronger execution will result in modest back half revenue growth. We now expect that Wizards of the Coast will deliver high single-digit revenue growth compared to our original guidance of mid-single digits. We are confident in the back half releases slated for MAGIC. And digital licensing should also be supported by the continued success of MONOPOLY GO! and the upcoming release of the AAA role-playing game, Baldur's Gate 3.
And finally, for entertainment, we are now expecting revenue declines of 25% to 30%, which incorporates the impact of the writers and actors strikes on production deliveries in the back half of the year. Adjusted operating margin is now expected to be up 20 to 50 basis points versus last year's adjusted operating margin. The margin outlook for CP and Wizards of the Coast are the same or better than our previous guidance. The guidance reflects unfavorable changes in entertainment given the strikes as well as the D&D impairments. This margin guidance continues to expect $150 million of in-year cost savings driven by our operational excellence program as well as assumes that the cost to clear inventory reduces in the back half of the year.
Despite the headwind from the entertainment segment, we continue to expect 2023 adjusted EBITDA to be relatively flat to prior year. And based on our current forecast, we continue to expect to generate $600 million to $700 million of operating cash flow. From a capital allocation standpoint, our priorities are to invest behind the business, pay down debt and return excess cash to shareholders via dividends. We expect to use the cash generated from the sale of the eOne film and TV to pay down debt, which will accelerate the reduction of our overall debt by a minimum of $400 million and advance our progress towards achieving our 2.5 times long-term leverage target. In terms of earnings per share, despite adjusted EBITDA guidance remaining unchanged, the film and TV business has created additional volatility impacting below-the-line items, including interest expense and tax rate.
Through the second quarter, film and TV has created an approximate $0.50 negative impact on earnings per share, and based on our updated outlook, we anticipate an additional $0.10 to $0.20 negative impact on the full year. Given this, as well as the divestiture, we are withdrawing total Hasbro, Inc. earnings per share guidance for the year, and we'll revisit reintroducing the metric once we have closed the transaction. Our remaining segments are continuing to grow their EPS contribution versus original expectations and versus last year behind strong Wizards growth and cost savings momentum. I'm three months in at Hasbro. And every day, I am more excited about the opportunities ahead for this amazing company. We have a lot of work ahead of us to deliver the year, but we are making progress in gaining momentum with today's announcement of the sale of the eOne film and TV business being the latest milestone.
And with that, I'll turn it back over to Chris to wrap up.
