Yahoo Finance

Hasbro CEO Chris Cocks. Chris, good to see you.

Brian, thanks for having me back. Uh, so last year we had the talk about the conference. We had the same conversation a little bit. You were in turnaround mode. We're 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 nodes.

Kidults, 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 kidults, me being one, I'd prefer just to call them, uh, fans.

Is it fair to say that that older, maybe it is kidults, 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 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 largely stopped around the age of 12.

I'm still a kid.

Yeah, totally. Kidult. Um, 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 Takara Tomy 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 talk to them, 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 at 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've been making bank off of Monopoly Go. Uh, that was very clear in the most recent quarter. 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, their 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, um, 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 going to be able to publish on every platform. You know, we've chosen PC and console because that really 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 game, 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, 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's 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 Q4.

One number from your most recent quarter really left an impression on me, inventory, down 51% year over 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 years ago. And so I think we've made a lot of moves to make sure that doesn't happen ever again.

So too much inventory.

Yeah, we had too much inventory coming in 2022 out of the pandemic. And so we've right-sized 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 costs 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 Hasbro.

So if I want a new Nerf gun this holiday season, I'll be able to find it.

Yes, but I would say buy early.

Okay, fair enough. Uh, Hasbro CEO, Chris Cocks, good to see you. All right, I appreciate it. Always, uh, great to get some time with you. We'll be right back on Yahoo Finance.

Thanks so much.