Hasbro CEO talks earnings, new products, and how oil prices could affect toy prices

🎥 Feb 10, 2021 📺 Yahoo Finance ⏱ 9m 👁 737 views

Hasbro CEO Brian Goldner joins Yahoo Finance Live to discuss the company’s latest quarterly results — which topped analyst estimates on the top and bottom lines — as well as its latest products and whether toy prices will go up as oil prices rise. Subscribe to Yahoo Finance: https://yhoo.it/2fGu5Bb About Yahoo Finance: At Yahoo Finance, you get free stock quotes, up-to-date news, portfolio management resources, international market data, social interaction and mortgage rates that help you manage your financial life. About Yahoo Finance Premium: With a subscription to Yahoo Finance Premium,...

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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.

Source: AI-verified profile updated from Brian Goldner's recent appearances. Browse all interviews →

Transcript (13 segments)

Interviewer0:06

All right, the toy industry is coming off a pretty good 2020 as people stayed home during the pandemic and played a whole lot of new board games. That industry growth is expected to continue this year, though perhaps at a little bit of a slower pace. We better chat all things toys with Hasbro's Chairman and CEO, Brian Goldner. Brian, always good to speak with you here. So your fourth quarter out this week, U.S. and Canada sales up 16 percent. Good people are still home buying a lot of games. Has that momentum continued?

Brian Goldner0:32

It really has. You know, we saw for the full year 2020 that our total games category was up 27 percent, and for the full year was up 15 percent. As we enter 2021, our POS thus far have been up nearly 30 percent. Games are really running ahead. The Nerf business is performing quite well. Our Play-Doh business, people are still very much into making connections, playing together. And in fact, what we've seen through research is a lot of new families have come into the category that had not really been involved in game playing up until this past year. So in many ways, the headwinds that we've seen in supply chain and store closures will become a tailwind as the consumers really adopted a lot of these behaviors.

Interviewer1:21

Brian, last year was the year of board games. What will this year be?

Brian Goldner1:25

So several fold. We think our games and toy business will grow in the mid-single digits, ahead of the industry. As you know, eOne was up in the fourth quarter. We're back into production on television and film, and we believe eOne can go back and achieve the kinds of revenues we saw in 2019, which would mean nearly 30 percent growth in that business for 2021. And then our Wizards of the Coast business, as you know, with Magic: The Gathering and Dungeons & Dragons both having best-ever years this past year, we expect double-digit growth as well there as they continue to move toward doubling the size of that business overall by 2023. So if you blend that all together, we expect double-digit revenue growth at Hasbro and a real opportunity to maintain our margins with that growth this year, 2021. And there are a few costs that come into the business as a result of a lot of the digital games we're doing for Wizards, but the fact is, very strong growth, mid-teens operating profit margin, very strong cash generation. You saw at the end of the year we had $1.45 billion in cash. We had prepaid some of the debt, and we expect to get back to our debt to EBITDA of two to two and a half times.

Julie2:43

Brian, it's Julie here. I have a couple of Magic: The Gathering fans in my household, I must say. However, they're also, and I would argue even more, Roblox fans, especially these days as the kids are home a lot. So how are you thinking about that digital competition? You mentioned you do have some digital offerings that are linked to your existing games, but is that your biggest competition right now, that online migration?

Brian Goldner3:08

Well, actually, it's very complementary. You know, many people had said, you know, when we launched Magic Arena, which is an online version of Magic: The Gathering, with the card game being played face-to-face, that would be cannibalistic. But instead, it's really driven the card game. It's really built-in marketing. We're getting more of the 24/7 day parts where our consumers are playing nearly nine hours a week online. And then we're offering great digital games across an array of brands that are more consistent with, like, a Roblox demographic. Remember, Magic: The Gathering, D&D are played with teenagers and older. But, you know, we've got a great Yahtzee with Buddies game from Scopely, that's a third-party license we have. Scrabble Go, we have a number of My Little Pony games and Transformers games, increasingly G.I. Joe. So yeah, we want to participate in digital games as well as face-to-face gaming, and we have a roadmap to get there.

Interviewer4:07

You know, Brian, I'm curious about the demographic mix. You may have seen in 2020, I mean, I think about myself and my peer group, we just all we could do is stay home. And, you know, my wife and I bought a couple of board games and kind of played them, and I don't know, it's going back to watching Netflix. But does that change the way you are thinking about potential addressable markets where people, you know, maybe rediscovered Magic after having put it down after college, as an example? And are you thinking about trying to pull some of those lovers back?

Brian Goldner4:36

That's exactly right. Well, Hasbro has enjoyed for years a broader demographics and a broader portfolio than a lot of our competitors. We have, you know, toys and games that play at Play-Doh and Chutes and Ladders for the youngest children, and then you have Magic: The Gathering and Dungeons & Dragons and Axis & Allies and Risk that play for that older audience. And so it's been our responsibility to contemporize those games, bring new versions to these audiences, and people have really responded. You know, you see a games category that's grown by nearly 30 percent in the fourth quarter and 15 percent last year. The momentum has continued. The new products that we're bringing out around D&D and digital, and in Magic, Magic Arena, which has only been available on PC thus far, is moving to Android right now in open access and will move to iOS this year. So we're going to get to the heart of that mobile gaming player through Magic: The Gathering, and that's millions of new players that would never play on PC, would play more casually. We're also launching a casual Magic: The Gathering game called Spellslingers. We're launching a Dungeons & Dragons game called The Dark Alliance. And so you're going to see an array of games that really reflect the demographics of Hasbro, running from the youngest audiences all the way through adults.

Interviewer5:59

Brian, the eOne pipeline is pretty impressive. You called out 150 projects, and you also have 30 Hasbro IP in terms of products. What movies, what content will be coming from you this year? And do you think that will drive more revenues this year from eOne than you originally thought when you bought the business?

Brian Goldner6:16

Yeah, we've actually had more success in developing Hasbro IP during a period where people were working virtually together. So while TV and film wasn't in production, we had the teams together, there was more integration. As you know, we talked about our cost synergies, we've achieved beyond the cost synergies we thought we'd get in year one. And we've now stood up a number of creative projects. We have an investor meeting coming up on February 25th, and the team is going to outline any number of major Hasbro IP that will be on stream television, in motion picture. But I'll give you a couple: Dungeons & Dragons movie is progressing. You're going to hear more about D&D in television. Our Transformers business, we're clearly working toward another film, but we also have other Transformers new content coming. We have great creative stewards working on a brand new take for Power Rangers in a young adult space as well as a future feature film. So you're going to see that we've made a lot of progress to put Hasbro IP in the market. And of course, now we have a profitable entertainment engine versus our marketing expense that we used to take to drive consumer products and gaming. And then the flywheel is, of course, it will attract our toy and game business to be developed, and then the consumer products licensing as well as digital games and the games and brands at Wizards of the Coast.

Interviewer7:41

Brian, I was going to ask you a different question, but this one just came in from our very big toy fan and our producer, Nick Monty. I mean, this guy loves toys. He wants to know about the rise in oil prices. Oil prices have really spiked over the past month or so. Does that have you start to see that impact how you produce your toys, and are you looking at price increases?

Brian Goldner7:59

Yeah, no, we're not really looking at substantial price increases on our products. Luckily, the way the oil prices work, the resin prices sort of move in arrears, and we signed contracts with a lot of our third-party manufacturers for more than 12 to 18 months. So what we might see, oil prices creep up, and then over a period of time behind that might go resin prices. But we haven't seen major spikes yet. We are seeing a bit of pressure in domestic shipments. We talked a little about that on our call with investors, and that's something we think we can mitigate over time. But have seen that as a result of the surge of demand domestically and the increases that we're seeing, you know, a nearly 50 percent increase in e-com and omni-channel. And of course, that requires a lot of domestic shipments and just-in-time inventories.

Interviewer8:53

Right, we'll leave it there. Hasbro Chairman and CEO Brian Goldner, always good to speak with you. Stay safe, and hope to talk to you around your investor day soon. All right, great, take care, Brian.