Hasbro

Retail

Hasbro raised prices throughout 2021 citing costs and revenue goals

April 2021: Hasbro announced it planned to raise prices to counter high material costs.  “Hasbro Inc (HAS.O) said on Tuesday it would raise prices of toys and games to counter higher raw material costs as the company sees surging demand for its Nerf blasters and board games from families spending more time at home. Shares of the Monopoly maker, which late on Monday announced the sale of Entertainment One Music to Blackstone Group Inc (BX.N) for $385 million, rose 1% in morning trading.” (Reuters, 4/27/2021)

Hasbro’s CFO said that the price increases came amidst surging demand for its products. “Freight and input cost increases have become more pronounced over the past several months, and we have plans in place to help mitigate those costs, including price increases for the second half of the year,” Hasbro Chief Financial Officer Deborah Thomas said. Demand for toys has remained robust more than one year into the pandemic, with the company reporting a 14% rise in first-quarter sales in its consumer products unit.” (Reuters, 4/27/2021)

July 2021: Hasbro’s CEO said the company planned to continue increase prices through the year as part of their plan to “meet our full year targets” Holiday season is right around the corner, and toy and game maker Hasbro warned of increased prices in the months leading up to it.  “We successfully established price increases that go into effect during the third quarter and provide an offset to the rising input and freight costs in the business,” CEO Brian D. Goldner said in a quarterly earnings call Monday. “These supply chain pressures are meaningful, but given the strength in our business, the actions we have taken, combined with our global footprint, we continue to believe we can meet our full-year targets.” (Business Insider, 6/27/2021)

Hasbro’s CEO said he expected robust demand despite hiking prices, which would take full effect during the fourth quarter or holiday season. “Hasbro CEO and chairman Brian Goldner expects robust demand for toys to continue even though the company is hiking prices to offset increased shipping and other costs. ‘For example, on average, ocean freight is about four times more expensive than it was a year ago,’ Goldner said in an interview on CNBC’s ’Squawk on the Street’ Monday. Hasbro expects worldwide price increases will take full effect during the fourth-quarter as the company experiences higher costs.” (CNBC, 7/26/2021)

Hasbro’s CEO said the price increases would allow them “to cover our costs and to maintain our gross margin and to ensure we can achieve a 15% or better operating profit margin.” “Hasbro said it is continuing to see strong demand for its Dungeons & Dragons and Magic: The Gathering games. Goldner anticipates that consumers will remain interested in these and other products and sales won’t be hurt by the higher prices it is putting in place  ‘That is to cover our costs and to maintain our gross margin and to ensure we can achieve a 15% or better operating profit margin that we set as our target for the year,’ Goldner said. Hasbro said it expects revenue to grow at a double-digit pace this year and position it for profitable growth this year.” (CNBC, 7/26/2021)

Hasbro’s suggested the average price increase would be less than 10%. “An analyst asked about specifics of the hike, but Goldner said only that a 10% increase would be “a bit high,” suggesting a single-digit increase is more likely.  “We are implementing price increases for toys and games during the third quarter,” CFO Deb Thomas said. “We expect this to offset the rising costs in freight and commodities we continue to see across the business.”  (Business Insider, 6/27/2021)

Hasbro said the nature of their products allowed them to pass costs on easily

October 2021: Hasbro’s CFO said that “the beauty of our consumer products product line is new every single year. So we can engineer our product to hit certain price points.“ “Fred Wightman — Wolfe Research — Analyst: Hey, guys. Good morning. Deb, I just wanted to follow up on your commentary about the medium-term operating margin getting back to over 16%. When you look at a lot of what you’ve dealt with this year in terms of the input costs, how are you viewing those as far as transitory versus structural? And what do you think that means for pricing going forward? Could we need to price a little bit more over the next few years to offset that? How does that all shake out for that margin trajectory going forward? Deb Thomas — Chief Financial Officer: Good morning, Fred. Yeah, you’re right. Everyone — the whole world, I think, is seeing input costs going up right now. Trends have been good lately. We’ve seen them coming down a bit in the last short period. However, the beauty of our Consumer Products product line is — a lot of that product line is new every single year. So we can engineer our product to hit certain price points. That being said, we do believe that there’s going to be that group of cost inflation we’ve seen is going to continue for a period of time. (Hasbro Q3 2021 Earnings Call, 10/26/2021)

Hasbro’s CFO: “we do have the opportunity to reinvent our product line — the majority of our product line every year, and therefore, we can just take cost out of it as we do that.” “Deb Thomas — Chief Financial Officer:  Looking at inflation, we’re dealing in inflationary markets in most places. And again, I’ll go back to what I could find on the shelves at the grocery store was more expensive, right? So it’s a matter of, I think, the — all industries are facing a bit of this right now. But we do have the opportunity to reinvent our product line — the majority of our product line every year, and therefore, we can just take cost out of it as we do that. We’ve been working very closely with our manufacturing partners to ensure they’ve got the right components to make the product, and we’ll have it. That’s what’s most important. And then we’ll ensure that it’s made the right way and priced appropriately for the market as well.” (Hasbro Q3 2021 Earnings Call, 10/26/2021)

Hasbro deflected on pricing questions by stressing retailers “set the pricing”

October 2021: When asked about the opportunity to pass more costs onto consumers, Hasbro’s Interim CEO deflected by saying “remember…retailers set the pricing.” ““Alok Patel — Berenberg Capital Markets — Analyst: Hi. Thanks for taking my question. I was wondering if you guys can comment a little bit on some of the price increases that were supposed to be in effect in Q3? How have they materialized versus expectations? And with POS up strong, is there more room to pass on some of the cost to the consumers and the retailers? Rich Stoddart — Interim Chief Executive Officer: Yes. So the first thing I’d say is just to remember, right, retailers set the pricing. But we did — those price increases went into effect in August. And so we’re really seeing the full impact of that pricing in Q4.”  (Hasbro Q3 2021 Earnings Call, 10/26/2021)

Hasbro’s CFO also repeated “The retailer actually sets the price to the consumer, we don’t. So we won’t be taking further price increases in 2021.” “Deb Thomas — Chief Financial Officer: Yes. I agree, Rich. I think you hit it on the head. The retailer actually sets the price to the consumer, we don’t. So we won’t be taking further price increases in 2021. That would be very disruptive to our retail partners as well as if you think about the cost of running a company to implement something like that at this point is very difficult, right? So we want our retailers to have predictability for their season as well. However, they set the ultimate price to the consumer, and there’ll be plenty of Hasbro toys and games for the consumer to buy this holiday season.” (Hasbro Q3 2021 Earnings Call, 10/26/2021)