Hasbro CEO: Toys will always be an important part of our business
Joining us here at Post 9 is Hasbro CEO, Chris Cox. Welcome. Thank you for having me, Sarah. Yeah, at the at post nine, it’s been a while. I mean last year was rocky in terms of the share price, but you are starting to see some, I don’t know if we call them green shoots or signs that the turn around is working, what’s clicking. Well, I definitely think we’re getting to the right side of the turn around. You know, if you look at our toy business, that’s where really the turn Around’s been focused and I think we’re showing shareholders we’re serious about cost restructuring. If you look at our games business which has been growing at a healthy clip but continues to do so at a very profitable rate. And then I think the real start of the show in Q1 was our IP business. You know, our licensing business is literally on fire, especially in digital. Monopoly GO is the biggest mobile game launch ever and Balder’s Gate 3 is one of the most critically lauded games in history. But cost cutting has also played a big role. Oh for sure, for sure. Where are you in that process? So our goal is $750 million of cumulative gross savings by 2025 and we’re well on path. You mentioned IP. Some some analysts we were talking to were wondering, is it still a toy company? Are you still focused on toys? Because a lot of the growth that you’ve been talking about lately has been in video games and digital IP, that sort of thing. Yeah, well, I frame this is in the business of play and we have three primary business lines. We have games, we have IP and we have toys. Toys will always be an important part of our business. But I think the real value creation over the last couple quarters and years has been in games and IP. Toys is a bit of a turn around. But I think we’re on the right side of that turn around and there’s going to be a definite value unlocked there. It’s tough. I mean one thing that made news last couple week was the birth rate in this country, which is close to some record lows and that’s having an effect on the toy business, on the baby care business. We see it in Proctor’s results. Is that how does that change the long term forecasting for that part of the business? Well, I think you have to to look at the, the total addressable market that your brands have and Hasbro is fortunate in that probably 60 to 70% of our business is driven by consumers, 13 plus, that’s driven by games, that’s driven by licensing, that’s driven by collectibles. And I think we’re pretty unique inside of the toy space on that front. Is it less seasonal than it used to be, The toy business, the toy business still is pretty seasonal. The games business and the IP business tends to be much less. So what about the conversations you’re having with your partner Disney on this front? What are those like? Disney’s our most valuable partner. So we do Star Wars. We do Marvel with them. You know, they. Oh, yeah, thank you. We just took over the Empire State Building a couple weeks ago. I mean, we’ve been into business with the Walt Disney Company since I think 1954. And that’s a partnership that I expect to stay strong moving forward. Are supply chains pretty clean at this point. We we spent a couple years really fretting about international supply chains and goods overall, but especially in consumer products. Yeah, our supply chain looks pretty good and again I think we’re unique inside of the toy space. You know while about 5060% of our our total volume comes out of China and Southeast Asia, probably 95% of our profit is driven by near shore manufacturing because of games and licensing. So while we have some exposure to supply lanes, while we have some potential geopolitical risks associated with you know making product overseas, it’s far less than I think other companies have. And have you gotten any indications, I mean material indications of waning demand? This has been a tough week, for example, in fast food and some restaurants and even some consumer products like Pepsi where they’re talking about a, a consumer at the low end who’s very attentive to price. Now, are you seeing that? Well, I think the toy industry took some hits in 2023. You know, we had a big pop with COVID. But I think the early going in 2024 has been pretty good. The industry is starting to, you know, flatten and show some green shoots of growth. We had a really good March. April’s off to a pretty good start. So you know, toys tends to be this category that’s pretty resilient historically because parents tend to want to spend on their kids and even older adults tend to want to spend on their passions and that’s kind of the business that we’re in.