Former Chairman & Chief Executive Officer, Hasbro
Hasbro CEO Brian Goldner discusses earnings beat on Q3 estimates, stock drop, and strategy
Hasbro CEO Brian Goldner discusses the earnings beat in Q3, the stock dropping almost 10%, and how challenges facing the movie business have impacted the company's business, and holiday shopping.
#Hasbro #Hasbroearnings #toys
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About Brian Goldner
In July 2020, Goldner stated that Hasbro's supply chain had improved after being closed from mid-March to mid-May, with manufacturing sites in Massachusetts, Ireland, and India reopening. He reported that consumer demand was strong, with point-of-sale sales up 18% in the United States and globally up high single digits, but noted that weak supply and retail inventories had declined by nearly 20%. Goldner said Hasbro had diversified its supply chain to about 55% in China, aiming for 50% by year-end, and discussed the company's ability to flex toward e-commerce if brick-and-mortar retail faced continued challenges. In May 2020, Goldner described the first quarter as "solid" and noted a "giant step up" in e-commerce and omnichannel sales. He said the second quarter would be challenging due to store closures and manufacturing disruptions, but the company expected to be ready for the holiday season. Goldner highlighted a 40% jump in gaming sales and said Hasbro was producing 50,000 face shields per week for health workers in Massachusetts and Rhode Island. In February 2019, Goldner characterized 2018 as a "disruption and an interruption" to a growth trajectory, projecting mid-single-digit revenue growth and a return to operating profit margins above 15% by 2020, driven by brands such as Power Rangers, Transformers, Nerf, and gaming properties like Magic: The Gathering.
Transcript (13 segments)
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Interviewer0:05
Toy maker Hasbro posted third quarter earnings that beat analyst estimates, but the stock dropped over nine percent on some concerns about slowing growth. Some analysts are calling the move unjustified though. Let's bring in Hasbro CEO Brian Goldner to discuss. Brian, I went through the quarter, went through the conference call. I didn't quite understand what the market was seeing with that sell-off. What are you hearing?
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Brian Goldner0:25
In the aftermath of the quarter, you know, we had a great quarter. We clearly had grown our revenues in toys and games and our digital businesses. Nine percent growth in the U.S., seven percent growth in Europe. We're back on track and resuming live-action production with our eOne studio, 25 productions up and running. I'm also incredibly excited the team has done an amazing job in getting prepared to take over a lot of the toy and game business for the eOne properties like Peppa Pig and PJ Masks that will come fall 2021. So we've made progress there and a full year 2022 of our product line alongside of an immense array of licensed consumer products. So, you know, we stay focused on building a differentiated strategy. Our gaming business and Magic: The Gathering and Dungeons & Dragons both grew double digits. That's our focus: continue to grow in gaming and consumer products and entertainment.
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Interviewer1:23
My sons are very familiar with those games, they are definitely present in our household. But I want to talk about a segment of your business that has been hurting because of the pandemic, and that's the movie tie-ins, what you consider your partner brands. I know revenue there fell four percent. What do things look like going forward? You're not going to have that big blockbuster in the movie theaters come holiday time. A lot of those are now being either released to streaming or they're being delayed for the time being. Do you still see movie tie-ins being strong if these movies do indeed just have to go to streaming services?
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Brian Goldner2:01
You know, it's interesting. For the fourth quarter is a great example of a two-fold strategy that we're employing. On the one hand, we do face the comps of Frozen from last year. October 4th we began to merchandise both Frozen and the Star Wars movie became last fourth quarter. So we are up against the Frozen comps. But on the other hand, The Mandalorian and the support for Star Wars and the sales that we've seen around the streaming content from Disney+ have been exceedingly strong. And so we're continuing to see people engage with great content. It's a combination now of theatrical content and streaming content. Over this past summer we launched a series of episodes on Netflix called War for Cybertron which was on our Transformers business, and it led to viewership at the top of that platform, service performance, and also led to great sales around our merchandise engagement from fans. So I think as you go forward you're going to see a kind of a combination strategy. Still, the big movies will be in theaters, and I know that people are very desirous to get back into the movies when it's the right time and it's safe. And then also increasingly streaming content that will engage audiences. I think we've hit the inflection point where there are enough people watching streaming content at once to create the kind of events that lead to great retail and merchandising success.
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Interviewer3:24
Brian, are you nearing a streaming content deal for Dungeons & Dragons?
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Brian Goldner3:29
We are working on developing storylines for live-action Dungeons & Dragons content. We have a lot of interest from a number of different players. We have an executive we brought in earlier this year, Jeremy Latcham, who came from the Marvel Cinematic Universe. He's now working for us. And Michael Lombardo who came over to run our television business came from HBO. So yes, we're robustly developing Hasbro brands in television that will link up quite well to all the effort we're putting against Dungeons & Dragons and Magic: The Gathering on our gaming side, including a whole array of digital games that will launch over the next year, two, and three, and really raise the specter of those brands, engage far more players.
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Interviewer4:11
But Brian, I would encourage you, I played Baldur's Gate 3 over the weekend. It's in early access on Steam. It seems like it would be right up your alley. I certainly enjoyed playing it. You might enjoy it as well.
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Brian Goldner4:24
You know me pretty well. We have talked many, many times. You know, we talked yesterday. I talked to Walmart CEO Doug McMillon at our conference, asked him what do you think the holiday season is going to be. He said good, but with some caveats. You know, a lot of people are out there struggling. How do you see the holiday season shaping up?
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Interviewer4:40
You know, we believe we'll have a good holiday season. It's interesting, we're sitting here today just a day after earnings, already a third through what is the holiday. The holiday is more stretched out this year than ever before. It began very early in October. You had big omni-channel events from Walmart and Target and they're performing quite well. We had big Prime Days. So we had to be geared up and ready with inventory that we had been chasing through the third quarter to set up our holiday season. And so in October we've seen high-teens POS growth for both toys and for games. And we believe we'll have a good holiday season and we also believe we can grow versus last year's numbers which would be pro forma the combination of eOne and Hasbro. So again, good holiday. We've only got 60-plus days left in the year, believe it or not. But yet, we'll have even more great business to do in 2021. We're very enthusiastic about 2021 as we begin to make that progress on the Hasbro IP with eOne and be able to get into a number of partner and Hasbro entertainment initiatives for 2021.
Brian, what's it going to be like for people clamoring for these hot toys as we move closer to the holidays? They might not be in traditional stores trying to grab them off the shelves, but they'll be doing a lot of buying online. Do you anticipate any hiccups in the supply chain in being able to meet what might be very strong demand here this holiday season?
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Brian Goldner6:09
Yeah, no, the demand has been incredibly strong. You're absolutely right, it's a great question. And we have been chasing demand, particularly on some of our bigger new initiatives like Nerf and our gaming business throughout the year. You know, our takeaway online, takeaway for games year-to-date through the third quarter was up 70 percent. And so clearly, we're down in retail inventory and we've been working to catch up. We have demand and supply virtually matched now as we are into the fourth quarter. But certainly, I would say that there's not going to be an extra supply of lots of toys and games come Christmas day.
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Interviewer6:48
All right, let's leave it there. Hasbro CEO Brian Goldner, count me as a viewer for Dungeons & Dragons whenever that launches, I'm your guy. We'll talk to you soon. Thanks.
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Brian Goldner6:56
Thanks.