Hasbro Earnings Call Nuggets: U.S. Point-of-Sale Movement and MAGIC
U.S. Point-of-Sale Movement
Sean McGowan – Needham & Co.: Number one, could you give us a sense, more detail on U.S. point-of-sale movement in the quarter?
David D. R. Hargreaves – COO: I think one of the things that we’ve said is that in the U.S. our shipments were down in the fourth quarter I think about 6%. And we’ve clearly offered a year, and one of the things that we’ve done is we’ve reduced our retailer inventories by over $100 million during the year with our big four U.S. accounts. So I think it’s clear that our POS was record down sort of significantly below and the reduction in our shipments in the U.S. The other thing in terms of the MPD data, one thing to note particularly in our games business, is that MAGIC – THE GATHERING really doesn’t appear in a lot of the MPD data because so much of that business is done through hobby shops and other channels of distribution. And so not only does MPD data get bad in terms of sales and also it doesn’t get that in terms of market share, both for the games business as well as for the company.
Sean McGowan – Needham & Co.: So, not all games is able to so far outperform what MPD was suggesting.
Brian D. Goldner – President and CEO: Yes, exactly. If you look at frankly, if you look at both trading card game business according to MPD as well as the games business and frankly it was well with Hasbro. That’s a big difference maker because MPD doesn’t track all of the sales that we get which is the predominant amount of sales that we get and expanding number of sales we get for MAGIC – THE GATHERING in the hobby channel.
Sean McGowan – Needham & Co.: And then you mentioned better, I think Deb mentioned better management and a favorable product mix as gross margins drivers. Can you give us some sense of what was the most important driver there?
Deborah M. Thomas – SVP and CFO: The most important driver which really better inventory management, by having lower inventory both at retail and our own inventory it really drove down obsolescence cost and the other things that come with that. In addition to that we did have some favorable product mix as you recall, we had stated earlier in the year that we have taken some price increases on carry-over product and that help with the margin on the carry-over product and our new product with well received at the price point that they were offered.
Brian D. Goldner – President and CEO: The other thing in games our operating profit margin in games is the highest that has been in the last eight years. So, as I told you guys, as we talked about, as we were able to develop games across all these different formats with this expertise coming from the Gaming Center of Excellence, we are able to create games in any form or format and do that in a very profitable way, and so obviously, with games growing that changes the mix profitably and favorably.
Sean McGowan – Needham & Co.: Last question and I don’t know if this is in any of the supplements you’ve provided, but can you tell us where these various charges are taken through up and down the P&L?
Deborah M. Thomas – SVP and CFO: Sure. We do have that. It’s in the P&L. Let me just find that section, if you don’t mind for a moment. We have in cost of sales $2.8 million, in product development $10.9 million, and in SD&A $33.5 million, for the total of $47.2 million.
Brian D. Goldner – President and CEO: Should I mention that it’s one of the charts that we put out as part of the presentation, the last chart.
Felicia Hendrix – Barclays: I just wanted to follow up and just to clarify your answer to Sean’s questions. So, just so I understand, was your U.S. point of sales down more than the 6%?
Brian D. Goldner – President and CEO: No.
David D. R. Hargreaves – COO: No, less than, because our shipments were in, were down 6%, but we reduced our inventory in the trade by over a $100 million. It means that our POS decline was substantially less than that.
Felicia Hendrix – Barclays: Then are you saying that the games POS was up, if you include MAGIC?
David D. R. Hargreaves – COO: Well, obviously, we don’t get the tracking from Hobby the same way we get the absolute sales and we know the sell through, but we don’t have NPD data for the MAGIC portion of the business, but we know what the sales were overall and we knew how the sell-out went because we get that data in a different manner from our (hobby) channel.
Felicia Hendrix – Barclays: And then Brian you mentioned in your prepared remarks and you also showed in the slides that the retail inventories in the U.S. and Canada were down. I was just wondering if you can give us some color where they were internationally?
Brian D. Goldner – President and CEO: The inventory in international markets in certain areas were up, frankly, because we’re growing those businesses in emerging markets. We’ve put into place and we talk to you guys about the fact that we have now our Russian warehouse where we’re putting product in. The business is one of our strongest growth businesses. In Brazil we have warehousing and are shipping product direct. So those are areas where we’re growing inventory. You want to comment?
David D. R. Hargreaves – COO: Yeah, but I think in the aggregate we were certainly down in Australia, we were down in Mexico, I think we were down in Canada. Europe was a little bit of mix, so some markets up. So in the aggregate not only were we down $100 million plus in U.S., but in the aggregate I think our retail inventories were down at least a $100 million customer orders and then Hasbro’s inventories as you saw were down.
Felicia Hendrix – Barclays: And just final, maybe a bit of housekeeping. Just trying to understand your tax rate was lower than expected despite the higher mix of U.S. sales in the quarter. So just wondering what drove that.
Deborah M. Thomas – SVP and CFO: We had a few discrete items but our underlying rate was 27%.
Brian D. Goldner – President and CEO: So actually it was up a bit versus year ago.
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