The Energon Pub

A lot can change over a week-end these days. The CFO and COO of Hasbro, Gina Gedder, was answering questions at the JP Morgan conference and bank analysists did not waste anytime asking about the impact on tariffs. This is when we learnt that Hasbro had many plans and strategies and one involved simply no longer distributing product in the US. While Transformers are made in Vietnam (which currently has a 10% import tax), a huge bulk of Hasbro product is still made in China (Marvel Legends, for instance) and that had an import tax of 145%. At that rate, it's basically a ban for Hasbro since that means more than double of costs. Even redistributing the added cost among other products (including Transformers) was untenable and it was revealed that they were thinking of just not distributing to the US, or just not make it. And if they were to continue making the product, it would only be sold outside the US.

We were leveraging all of the different levers in our P and L to offset the tariff. Where pricing made sense and we thought it was tenable, we were planning to take it. And again it wasn’t like one product got everyone got the same rate. There were some products that maybe got a little and then there were some products that were getting more. There were some products that we just chose no, we’re not gonna actually produce anymore because it doesn’t make sense with that cost infrastructure to produce it and ship it into The US. Interestingly, some of the new complexity we added was some of the portfolio was only going to be for the international markets. Like we hadn’t really ever taken that approach before where you’re tailoring the product line by market, but it was something that we were prepared to do at the [145% tariff] scenario.

While Ms Gedder states that Hasbro never took that approach of catering to different markets like that before, this is something we saw with the Transformers brand in the G1 era where some product was only sold outside the US. But now that the import tax is lowered to 30%, for now, they can work out different pricing strategies to continue US distribution for their products, though it may include raising prices. If they would though, it would probably just be increases in the US since it has been confirmed, from a Canadian retailer Toysnowman, that the MSRP in Canada is not increasing for any Hasbro product. And they order months in advance so that means people outside the US probably wouldn't see a price increase.

This is extremely telling for the future of the Transformers brand though since it confirms that Hasbro, as a company, will not simply keep distributing toys if it isn't financially viable. While it sounds obvious, it does mean that if demand lowers due to increased prices, Hasbro is far more likely to just cease production/distribution rather than bring prices down. Basically, they answer to their shareholders and not to the consumers.

The presentation also focused on what they find to be the future of the brand in terms of growth, which is games. And that includes board games and card games (Wizards of the Coast) as well as their in house video game development. Transformers did not come up in the discussion on growth.

Here is a transcript of the exchange: https://www.investing.com/news/transcri ... CH-4045658

Seeing as most of the walmarts near me have reset the toy aisle and removed studio series and generations (or whatever it's called.) Only transformers one is left. And they were discontinued a while ago but back to full price. This has not looked good for our brand. And one of the many reasons I stopped buying.

This means that Hasbro probably WILL cease all US distribution at some point in the future. Don't they whine every quarter about how 'sales did not meet our expectations', and mask their poor decision-making under layers of corporate techno-babble about EBITDAs and supply chains, and 'softening demand'? If they're at the point now where they think terminating US distribution is looking good, and if they keep failing to meet their pie-in-the-sky 'expectations', then the only conclusion is that their ever-declining performance will have them ending US sales. After all - when was the last time Hasbro DIDN'T say they 'had a bad year'?

We still have Takara/Tomy and third party Transformers to fall back on. It doesn't look good though if Hasbro US is considering closing shop. The deal with China is only for 90 days too we think with 10% still on Vietnam, but that might change. Too much uncertainty. Corporations don't like that long term for business planning. Sigh.

Cheetron wrote:Seeing as most of the walmarts near me have reset the toy aisle and removed studio series and generations (or whatever it's called.) Only transformers one is left. And they were discontinued a while ago but back to full price. This has not looked good for our brand. And one of the many reasons I stopped buying.

Yeah, I don't think I've even been in a Walmart in months. They haven't had anything I've wanted in well over a year now, so I've given up. It's all online shopping these days, and most of what I've bought has been 3rd party figures. If I'm going to overpay, I might as well overpay for the good stuff.