Hasbro Earnings Call Nuggets: Games Business, Transformers and Beyblades Declines
On Monday, Hasbro, Inc. (NYSE:HAS) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Michael Swartz – SunTrust: Just a quick question on the Games business. Could you maybe provide us some more color just around your commentary on stabilization this year and then reverting to growth in 2013 and beyond. What do your plans call for the as far as category growth?
Brian D. Goldner – President and CEO: If you look at the Games business for the full year 2012, we do expect to stabilize the business. We’re focused on a number of new initiatives in the games category, our own brand as well as some partner brands. Our expectation really stems from the fact that some of our new initiatives are off to a great start. So as we look at year-on-year new initiatives and POS growth for those new initiatives that are up strongly double-digits. Also, the continued success of MAGIC-THE GATHERING as a brand, Hasbro’s own brands and then we’re beginning to launch ANGRY BIRDS STAR WARS, beginning to launch the ZYNGA brands, the continuation of our Boys Action Gaming as a category which has been successful throughout the year. MONOPOLY and LAZER TAG as well as TWISTER, some of our own brands come into the season as well. So, overall, our expectation is that we would stabilize the Games business this year and position us for growth in 2013 and beyond.
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Michael Swartz – SunTrust: I guess maybe just looked at it another way, if POS in the Games category just kind of – category wide continues to decline next year, I mean would you still expect to be able to grow?
Brian D. Goldner – President and CEO: I think if you look overall, our inventory in the Games business at retail is down 39% and yet POS on legacy games is down far less than that, and so, we feel that we’re well positioned with the new games initiatives, especially given the early traction we are seeing for those, particularly as we move into the U.S. business where it’s been particularly pronounced as an issue. The momentum we also have in our MAGIC-THE GATHERING business, the new launch of the KAIJUDO brand, which is a brand new brand from the Wizards of the Coast folks, all points us in a very positive direction in the games business overall.
Transformers and Beyblades Declines
Margaret Whitfield – Sterne, Agee: I was wondering if I could get more color on the level of declines you are seeing for BEYBLADEs and TRANSFORMERS and especially what is the outlook for BEYBLADEs and what kind of point of sale activity are you seeing for those two brands?
Brian D. Goldner – President and CEO: BEYBLADE has held up very well year-to-date if you take total year. Year-to-date our POS has held up relatively well. Obviously, it’s done better in the U.S. from a POS standpoint than some of our European markets, where the comps were particularly challenging, but overall, BEYBLADE is beating the trends, the average is one would expect in the Boys Action category following a phenomenal year. Part of that has do with the amount of new innovation that we’ve put into the BEYBLADE, the BEYWHEELZ category, that’s also supported in animation, something that we learned from the first time around the BEYBLADE, was to reinvent the brand as we move forward and you’ll see additional reinvention next year in 2013 and new animation, and a whole new segment of product. So, again, beating the trends in BEYBLADE and we feel very good about that brand going forward. That’s a great brand that sits alongside of great Marvel brands that have performed quite well this year. Obviously, TRANSFORMERS is performing kind of on par with what one would expect as we start to get momentum. We’re seeing good momentum in the TV supported product lines around the world and the fact that TRANSFORMERS is one the television in 170 countries around the world bodes well for us. So, overall we’re just up against some big comps. If you take BEYBLADE and TRANSFORMERS collectively together, the numbers that we reported to you, but taken together, we did $961 million in those two brands a year ago and so in the Boys business we’ve made a lot of progress. Marvel is certainly contributing significantly to that progress, but those are big comps and particularly in certain categories, particularly in the international market in Europe and in particular where the BEYBLADE business performed exceeding well in the third quarter last year.
Margaret Whitfield – Sterne, Agee: So, do you think the Boys category overall can grow this year given those difficult comps?
Brian D. Goldner – President and CEO: No, I think that what we’ve said is, we believe we’re going to grow overall this year. We’re going to grow revenues and EPS absent FX. That’s been our guidance. We believe that. I think the comps are challenging, but we’re also seeing great momentum in our preschool business and our Girls business. If you look at preschool our, POS is up double-digits. Our Girls business, our POS in the third quarter is up single-digit. There are some timing issues related to last year’s third quarter where we launched SESAME STREET, but if you look across a lot of our categories, we have a lot of great new innovation. We do have a lot of great new innovation in the Boys business, including in NERF and several of our Boys action brands. It’s a challenging comp. I’m not going to commit to grow it this year.