Yahoo Finance’s Alexis Christoforous and Brian Sozzi speak with Hasbro CEO Brian Goldner about the company’s Q3 earnings beat.
BRIAN SOZZI: Toy maker Hasbro posted third quarter earnings that beat analyst estimates, but the stock dropped over 9% on some concerns about slowing growth. Some analysts are calling the move unjustified though. Let's bring in Hasbro CEO Brian Goldner to discuss.
Brian, I went through the quarter, went through the conference call. I didn't quite understand what the market was seeing with that sell-off. What are you hearing in the aftermath of the quarter?
BRIAN GOLDNER: You know, we had a great quarter. We clearly had grown our revenues in toys, and games, and our digital businesses, 9% growth in the US, 7% growth in Europe. We're back on track and resuming live-action production with our eOne studio, 25 productions up and running.
I'm also incredibly excited the team has done an amazing job in getting prepared to take over a lot of the toy and game business for the eOne properties like "Peppa Pig" and "PJ Masks" that will come fall 2021, so we've made progress there, and a full year 2022 of our product line alongside of an immense array of licensed consumer products. So you know, we stay focused on building a differentiated strategy. Our gaming business and "Magic the Gathering" and "Dungeons and Dragons" both grew double digits. That's our focus-- continue to grow in gaming, and consumer products, and in entertainment.
ALEXIS CHRISTOFOROUS: My sons are very familiar with those games. They are definitely present in our household. But I want to talk about a segment of your business that has been hurting because of the pandemic, and that's the movie tie-ins, what you consider your partner brands. I know revenue there fell 4%.
What does-- what do things look like going forward? You're not going to have that big blockbuster in the movie theaters come holiday time. A lot of those are now being either released to streaming or they're being delayed for the time being. Do you still see movie tie-ins being strong if these movies do indeed just have to go to streaming services?
BRIAN GOLDNER: You know, it's interesting. For the fourth quarter's a great example of a two-fold strategy that we're employing. On the one hand, we do-- we do face the comps of "Frozen" from last year. October 4, we began to merchandise both "Frozen" and the "Star Wars" movie that came last fourth quarter, so we are up against the "Frozen" comps.
But on the other hand, "The Mandalorian" and the support for "Star Wars" and sales that we've seen around the streaming content from Disney Plus have been exceedingly strong. And so we're continuing to see people engage with great content. It's a combination now of theatrical content and stream content. Over this past summer, we launched a series of episodes on Netflix called "War for Cybertron," which was on our Transformers business, and it led to viewership at the top of that platform service performance, and also led to great sales around our merchandise engagement from fans.
So I think as you go forward, you're going to see a kind of a combination strategy. Still the big movies will be in theaters, and I know that people are very desirous to get back into the movies when it's the right time and it's safe. And then, also, increasingly, streaming content that will engage audiences. I think we've hit the inflection point, where there are enough people watching stream content at once to create the kind of events that lead to great retail and merchandising success.
BRIAN SOZZI: Brian, are you-- are you nearing a streaming content deal for "Dungeons and Dragons?"
BRIAN GOLDNER: We are working on developing story-- story lines for live action "Dungeons and Dragons" content. We have a lot of interest from a number of different players. We have an executive we brought in earlier this year, Jeremy Latcham, who came from the Marvel Cinematic Universe. He's now working for us. And Michael Lombardo who came over to run our television business came from HBO.
So yes, we're robustly developing Hasbro brands and television. That will link up quite well to all the effort we're putting against D&D, "Dungeons and Dragons," and "Magic the Gathering" on our gaming side, including a whole array of digital games that will launch over the next year, two, and three, and really raise the specter of those brands, engage far more players.
But Brian, I would encourage you-- I played "Baldur's Gate III" over the weekend. It's an early access on Steam. It seems like it would be right up your alley. I certainly enjoyed playing it. You might enjoy it as well.
BRIAN SOZZI: You know me pretty well. We have talked many, many times in the past. You know, we talked to-- yesterday, I talked to Walmart CEO Doug McMillon at our conference, and asked him, what do you think the holiday season's going to be? He said good, but with some caveats. You know, a lot of people, they're out there struggling. How do you see the holiday season shaping up?
BRIAN GOLDNER: You know, we believe we'll have a good holiday season. It's interesting. We're sitting here today just a day after earnings, already a third through what is the holiday. The holiday is more stretched out this year than ever before. It began very early in October.
You had big omni-channel events from Walmart and Target, and they're performing quite well. We had big Prime days. So we had to be geared up and ready with inventory that we had been chasing through the third quarter to set up our holiday season. And so in October, we've seen high teens POS growth for both toys and for games. And we believe we'll have a good holiday season.
And we also believe we can grow versus last year's numbers, which would be pro forma the combination of eOne and Hasbro. So again, good holiday. We've only got a 60-plus days left in the year, believe it or not. But yet, we'll have even more great business to do in 2021. We're very enthusiastic about 2021 as we begin to make that progress on the Hasbro IP with eOne and be able to-- be able to get into a number of partner and Hasbro entertainment initiatives for 2021.
ALEXIS CHRISTOFOROUS: Brian, what's it going to be like for people clamoring for these hot toys as we move closer to the holidays? They might not be in traditional stores trying to grab them off the shelves, but they'll be doing a lot of buying online. Do you anticipate any hiccups in the supply chain in being able to meet what might be very strong demand here this holiday season?
BRIAN GOLDNER: Yeah. No, the demand has been incredibly strong, you're absolutely right. It's a great question. And we have been chasing demand, particularly on some of our bigger new initiatives like Nerf and our gaming business throughout the year. Our takeaway, online takeaway for games year-to-date through the third quarter was up 70%.
And so clearly, we're down in retail inventory, and we've been working to catch up. We have demand and supply virtually matched now as we are into the fourth quarter. But certainly, I would say that there's not going to be a extra supply of lots of toys and games come Christmas Day.
BRIAN SOZZI: All right, let's leave it there. Hasbro CEO Brian Goldner. Count me as a viewer for "Dungeons and Dragons." Whenever that launches, I'm your guy. We'll talk to you soon, Brian.
BRIAN GOLDNER: There you go. Thanks. Thanks, guys.