Hasbro's three themes bringing in older consumers: CEO

Yahoo Finance Executive Editor Brian Sozzi sits down with Hasbro (HAS) CEO Chris Cocks at the Goldman Sachs Communacopia and Technology Conference to discuss the toy company's older customer base, its expansion into gaming, and the state of the industry ahead of the 2024 holiday shopping rush.

"I think we're a toy company in the most general sense that we're in the industry of play, and we make physical things as well as digital things. But I'd like to think that we're helping to redefine what a toy company can be. You know, to me, a toy company of the future is aged up, it's digital, and it's heavily partner-based. And I think that's been key to each of our turnaround notes," Cocks says.

Cocks notes that customers 13 years old and above make up 60% of Hasbro's sales, which makes the toymaker stand out against its competitors.

He attributes the success of this older base to three themes, the first being the fact that "everyone plays." He adds that the rise of digital — the second theme — "powers a lifelong relationship with play." Finally, Cocks emphasizes that partnerships are crucial, and by working with beloved brands like Disney (DIS), Takara Tomy, and Scopely, Hasbro can continue to drive play.

Gaming has proven to be a major success for Hasbro, as the company has experienced significant growth from its Monopoly Go! mobile game. Hasbro has another 10 games in development for PC and console, and more than 100 games in the pipeline for mobile through partnerships. Cocks explains that partnerships are key: "It's all about having multiple business models to defray risk."

As families start saving for their big holiday gifts, Cocks argues that "the toy industry is returning to its traditional role as a resilient category that retailers can rely on." He expects Hasbro's toy business to be up in the fourth quarter despite struggling with low inventory in its most recent quarter.

"We've made a lot of moves to make sure that doesn't happen ever again. We had too much inventory coming in 2022 out of the pandemic. And so we've right-sized that... So not only is our inventory down, the cost of our products are way down as well," he adds.

Catch more Yahoo Finance coverage and interviews from the 2024 Goldman Sachs Communacopia & Technology Conference, including Brian Sozzi's full interview with Mattel (MAT) Chair and CEO Ynon Kreiz.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video Transcript

Hasbro co Chris Cox.

Chris.

Good to see you, Brian.

Thanks for having me back.

Uh So last year, we had to talk about the conference.

We had the same conversation a little bit.

You weren't turn around mode.

You know, we were launching a lot of key initiatives.

So my question to you is the platform has changed.

Your company is so different.

I are you still, are you still just a toy company?

Well, I think we're a toy company in the most general sense that, you know, we're in the industry of play and we make physical things as well as digital things.

But I'd like to think that we're helping to redefine what a toy company can be.

You know, to me, a toy company of the future is aged up, it's digital and it's heavily partner based and I think that's been key to each of our turnaround notes, Koltz, right?

Is that the term you've coined?

Uh We didn't coin it.

Uh We use it now and then.

But uh speaking for all kid adults, uh me being one, I'd prefer just to call them fans.

Is it fair to say that older maybe it is kid adults, people over the age of 13 are powering hasbro's business.

Oh, yeah, 60% of our sales are to consumers.

13 plus, I think no other, no other toy company in the industry can claim that.

Why do you think that age demographic is coming back to toys?

Well, uh I think it's a couple of things, uh, you know, three things really animate our strategy.

I think the first thing is uh everyone plays, you know, play used to be something when we were kids where it largely stopped around the age of 12.

I'm still a kid.

Yeah, totally kid.

Oh, now I think with the rise of digital, which is the second theme, it really powers a lifelong relationship with play.

And so that's big and important to us as well.

And then last, but not least partnerships like uh you know, one company can't do it all itself, you have to work with multiple partners and we have some of the best in the business.

We work with Disney, we work with Tamara, Takara Tomi in Japan.

We work with Scopely.

Uh and they help us really propagate our brands and drive play.

Are the people in this room?

A lot of investors, analysts are they giving you, you talked to them, are they giving you credit for your pivot into gaming?

There's been a lot of deal activity in the gaming industry.

A lot of these companies have sold to higher multiples.

But I don't, based on my work, I don't think that's priced into your stock.

Well, that's nice of you to say.

And I hope all investors here.

Yeah.

Um, I think it is partially, uh, certainly, uh, we have a higher, multiple or a higher, multiple than most other toy companies.

Um, I think there's upside.

I think it's a growing tam.

I think we have a decade head start versus anyone else in the toy industry.

And uh you know, I think it's a source of upside for us.

So you, you've been making bank off, off of monopoly go.

Uh That was very clear in the most recent core.

What's next in gaming for you?

Oh, well, you know, we have all the games that we're developing ourselves.

We have about eight or 10 that are in development starting.

Uh they're PC and consoles where we're focused.

Uh We have over 100 games in the pipeline on mobile through partnerships.

Uh And then we have several interesting jvs and partnerships that we're also talking about as well.

Why the partnership model?

And is that more profitable than if you were to make the games yourself?

Well, I think it's all about having uh multiple business models to defray risk.

So, you know, I think it's important for us to be a games publisher.

I think we have to have a relationship with our consumers and we have to understand what they want, but we're not gonna be able to publish on every platform.

You know, we've chosen PC and console because that works for our brands, mobile, uh super high growth, probably the biggest aspect of the industry, but it's also super capital intensive and you have to be an expert marketer and publisher in there.

It's not for the faint of heart.

So we have some of the best partners in the business like Scopely, which is doing monopoly Go, which has done over $3 billion of business since it launched biggest, biggest mobile game launch in history.

I talked to the CEO yesterday of your largest competitor.

I'm sure you know who they are.

He was unwilling to say that the fourth quarter of the holiday season would be up.

What's your view on the holiday season?

Given everything we're seeing in the macro economy, I think right now the consumer is holding up pretty well and I think the toy industry is returning to its traditional role as a resilient category that retailers can rely on.

Certainly, we're seeing our toy business being up in Q 41 number from your most recent quarter.

Really left an impression with me inventory down 51% every year.

Two parts.

How is that happening?

And will you have enough inventory for the holiday season?

I have never seen a decline like that before in the toy industry.

Well, a little bit of that is uh we weren't as responsible about it as we should have been a couple of years ago.

And so I think we've made a lot of moves to make sure that doesn't happen ever again.

Too much inventory.

We had too much inventory coming in 2022 out of the pandemic.

And so we've right size that we've also done a ton of work to put in the right processes, right procedures, right.

Talent to manage our inventory.

So not only is our inventory down, the cost of our products are way down as well.

Supply chain is going from what I would say was a weakness for us in 2021 and 2022 to a real source of differentiation and strength for as if I want a new Nerf gun this holiday season, I I'll be able to find it.

Yes, but I would say bye early.

OK. Fair enough.

Uh Rocio Chris Cox.

Good to see you, Brian.

Thanks so much.

All right, I appreciate it.

Always.

Great to get some time with you.

We'll be right back on Yahoo Finance.