Tariffs, Toys, and the Kidult Takeover with Hasbro

Ann Berry (00:00):
60% of your toy sales you reported are now to adults. 

Gina Goetter (00:03):
Mainly it's the collectors. It's this trend of collectibility that is fueling a lot of our businesses. 

Ann Berry (00:11):
The toy and game industry isn't just for children anymore. It's a hundred billion dollars global business that's being shaped by changing consumer habits. Parents are buying fewer toys for their kids while more adults are buying toys for themselves. That kid adult market is now a major area of focus for Hasbro touching each of its three main divisions. Consumer products, which covers classic toys like Nerf and My Little Pony, as well as adult collectibles, wizards of the coast and digital gaming, home to board games like Magic and Dungeons and Dragons, plus their online versions and entertainment, which takes Hasbro's brands into animated shows and films. We discuss Hasbro's recent earnings, its strategy for handling tariffs and so much more with CFO and COO,  Gina Goetter. Let's get into it. Let's start with the topic jour, which is tariffs. And I just want to start with a quote from President Trump, which indicates the level of sympathy he may or may not have for the toy industry right now. The quote is maybe the children will have two dolls instead of 30 doll, and maybe the two dolls will cost a couple bucks more than they would normally. What does that mean for Hasbro? 

Gina Goetter (01:14):
Well, first of all, thank you for having me. Yes, I think everyone read that quote at the same time and had probably varying reactions to it. I think first and foremost, with the tariff situation, we continue to believe that play is a basic human rights and every kid deserves a chance to have that development opportunity and have full access to all of the products and platforms that you can experience play. President Trump though is right, that if these tariffs stick as is one, the availability of product will go down, the selection will lessen and it is going to become more expensive. So that is absolutely right, and I think Hasbro as well as many other toy companies right now are working through all of those tough choices. What is the portfolio going to look like? Where are we going to manufacture it? What are the pricing levers that we're going to put in place to try to mitigate the impact of the tariffs? So the quote, while not our favorite is definitely truthful and that will be the impact of tariffs. 

Ann Berry (02:30):
So toys within Hasbro's earnings, and the way in which you report out just to hone in on that little bit, sits primarily in the consumer products segment of your business. And just looking, I've got in front of me, your first quarter earnings, we'll come back to holistically, but your first quarter revenue for consumer products was down 4% versus prior year and also incurred an operating loss. So toys were tough for Hasbro even before this announcement. What are you and the team focused on right now to change the direction of that consumer products division? 

Gina Goetter (03:05):
Yeah, it's a great question, and you're right. The toy business has been going through a transformation for the past couple of years coming off of the highs that we had in COD, where our business, along with every other toy company's business was growing strong to then coming off of that, the industry itself has been declining us alongside with it. So we have been doing a lot of heavy lifting, reshaping the foundation of our toy business. Again, a lot of the same themes that I just talked about with tariffs. We spent a lot of time cleaning up our inventory and simplifying our portfolio, really getting our supplier base and our supplier foundation reset, getting the right pricing architectures put in place and focusing on fewer and bigger brands so that we could bring the surround of Hasbro more strongly to our portfolio. So we were down 4% in the first quarter. 

(04:01)
Last first quarter we were down 20% and the year before that we were also down 20% in the first quarter. So we were entering year three of our turnaround in a position where we were feeling really good about the trajectory. We had the portfolio cleaned up in our innovation, which is really the lifeblood of any toy company. The innovation was strengthening and getting much sharper right in that sweet spot of where our consumers, consumers were or are. So all of the heavy lifting that we did the past two years was setting us up for this year three of our transformation, which was really going to be about returning that business to growth. 

Ann Berry (04:41):
How much does the tariff challenge ironically give you some air cover to do even tougher things more quickly? With that division Al Mattel's pulled its guidance, it's already been pretty explicit that it's going to put up prices, frankly, that gives other toy manufacturers the opportunity to say, well, guess what? We're putting up prices too. So in terms of rejuvenating your supply chain, perhaps accelerating, pulling production out of China, talk to us about how tariffs could actually be an opportunity because it's a catalyst for change that all of your constituents will actually understand. Absolutely. 

Gina Goetter (05:17):
Absolutely. And you're right, I shouldn't have remarked on this before. We also have different air cover and a different competitive advantage versus other toy companies because we have a whole half of our portfolio that has very minimal exposure to tariffs and that half of the portfolio is growing like gangbusters. So right there, we've got a little bit of different freedom compared to some of the other companies. But you're right, what is the quote? You never let a good crisis go to waste. And we have been in our toy transformation building a pipeline of cost optimization and operational projects that we're going to improve the efficiency of the organization. And what we have done is started to just accelerate the implementation. A lot of the supply chain work that we had planned over the next two to three years, we're working hard to pull that all forward so that we can keep diversifying our production footprint away from China. 

(06:13)
We're also, from a pricing standpoint, we too, like Mattel, we are taking pricing. We're working hard not to affect every product and protecting certain price points that we know are sacred for consumers. But just last week we gave the notice to our retailers that we will be, as we get into the fall reset windows, we'll be taking pricing on select products. So it is a lever that we have in our toolkit that we'll be using because of how our business is shaping. We can see the puts and takes across the portfolio that we think even with the cost headwind that is coming at us from tariffs, we're going to be able to offset it by leveraging the strength and the diversity of total Hasbro. 

Ann Berry (06:58):
How about how you think about your portfolio of consumers? There was a phenomenon as we were doing our homework that captured our attention, which is the rise of the kiddo economy and 60% of your toy sales you reported and now to adults. Talk to us about who those adults are and what they're buying from you. 

Gina Goetter (07:17):
They're buying everything from us, but mainly it's the collectors. When you think about a lot of our businesses, it's the collectors, it's the fans of those franchises, and when our brands tend to play to that 13 plus crowd. So it's this trend of collectibility that is fueling a lot of our businesses. And when we think about our innovation pipeline that we have not only for this year but the years following, we have been very mindful of that insight. And as we're designing product, as we're designing marketing campaigns, as we're designing the reach and where we want these products to sit, we are starting to cater to and direct our efforts to that kid alt consumer. 

Ann Berry (08:01):
But where is it coming from? I'm curious. I've got to imagine all the consumer insights, resources one could possibly imagine. What is it that's driving this phenomenon? Is it nostalgia? Is it a ul? Is it rebelling against the rise of digital? What is it that's getting so many more adults to lean into buying these 

Gina Goetter (08:19):
Things? Oh, I don't think it's the rise against digital. I just think it's the franchises that we have, whether there are owned franchises or they're franchises that we license. So if we think about our biggest partner, our most important partner, Disney, they have some of the most storied franchises and we are the makers of the toys for them. So I think we work in partnership with our collaborators to create these products that the collectors and fans just are drawn to. That is what I would say is that it's how the whole ecosystem comes together. There could be absolutely some nostalgia. As I look at My Little Pony and what is happening with My Little Pony, it is all about no nostalgia. That is where we see the demand coming in. The strength of the brand this past year has been driven by China, believe it or not, and trading cards. My Little pony trading cards is what has taken off there and has made that brand and that business grow like gangbusters. So there's an element. I've worked in many industries over my career and toy, there is an element of fast fashion that lives in Toy. And so with some of our brands, it just kind of plays into that theme that collectibility, that fandom. 

Ann Berry (09:37):
It's interesting. I grew up with My Little Pony and there weren't trading cars at that time, but to your point, having this more consumable add-on to it is very smart. The other piece of it too is the entertainment side of your business. Gina, help us understand how much, give us some of your biggest IP treasures. Let's name some of those and talk about what your entertainment strategy is around those. 

Gina Goetter (10:00):
I would say our biggest right now is Peppa. So the company itself has been on a journey was entertainment. So back in, I believe it was 2019, we bought E one, which was a huge entertainment conglomerate and was producing shows and movies that had to do with hro, but they were doing a lot that didn't have to do with HRO and our core brands. And so we divested that in 2023 at the end of 2023. And so now what we're left with from an entertainment standpoint, our team is a hundred percent focused on taking the IP that is Hasbro and getting it into all of the hands from it, whether it is a show on Netflix to a movie development deal, to just YouTube shorts for Peppa. Our team is out shopping the ip, but we're taking a very asset light approach. We are not investing hundreds of millions of dollars into these ventures. 

(10:52)
We are kind of selling and licensing out our ip. So Peppa is for sure probably the best example of that where you can experience it in a few different forums. But we also, last year, I believe we announced that Monopoly, we sold the rights to Monopoly, and we are selling the rights to Clue. So some of these storied brands are getting into the hands of all of the entertainment avenues and they'll continue to monetize and make product on our behalf, but we're not investing it that way. From my chair, from my CFO chair, I see entertainment as a really great way to market and keep our brands relevant. It's not a huge profitable or it's not a huge profit driver or revenue driver for us. I see it as another just lever for marketing our businesses 

Ann Berry (11:43):
On the topics of Monopoly include we'll come to board games imminently, which will be more fun. I know for you to talk about because they are doing so well. But before we do, look, tariffs has now hit the film industry. We saw that announcement this week, 

Gina Goetter (11:55):
We saw that yesterday, 

Ann Berry (11:56):
Saw that yesterday. I mean, literally it doesn't stop. Have you even in the last 24 hours received any feedback from some of those partners with whom you are thinking or in discussions to have Monopoly include turned into film or TV series? Have they come back to you and said, look, we're just going to have to take pause for now and see what happens? 

Gina Goetter (12:15):
No, in short, no. Again, because taking an asset light model, there wasn't a huge financial commitment on our part or their part as they step into these things, and most movies and shows are years in the making. So even things that we would've signed last year will not be appearing on a screen near you anytime soon. So I think it's way too early for these studios. I think I saw a headline this morning that was like, people don't even know what that means when they say they're Taring movies. So yeah, it's too early. But again, for us from a financial standpoint, we weren't counting on any of those assets to deliver huge revenue or profit for us. So there's very limited financial liability. 

Ann Berry (12:58):
Well, let's talk about where you have been betting big on seeing more growth and more profitability, and that's the segment of your business that you is called Wizards of the Coast and Digital Gaming. Its a slightly, it's one of the long title. It's a long title, title, title, and perhaps not the most intuitive in describing what that segment does. So Gina, tell us what is sitting in that part of your business? 

Gina Goetter (13:22):
Yeah, I just call it Wizards for short, so we can call it Wizards, we'll call it from here on Out call. Even in one of my first earnings scripts, I'm like, can I just call it? I just kept having to keep saying it. I'm like, we're going to call it Wizards. So Wizards houses our biggest and our most profitable brand. That is magic. So this business is on a serious growth trend this year and has broached over, it's reached that billion dollar level of revenue. It kicks off the lion's share of the company's profit and is set up for just a really nice year here in 2025. So Wizards has magic. It also houses DD, which is a smaller brand, but also has some good growth potential. We're seeing that play through in the first quarter some good growth behind DD. And then lastly, all of our digital gaming efforts, whether it is Monopoly Go, which was a licensed partnership that we have with Scopely all the way to the other end of the spectrum where our self-published video game ventures are sitting. All of that sits within our wizard segment. To your point, as you think about our growth, that's the lion's share of the company's growth over the next three years is going to be coming from Wizards. 

Ann Berry (14:40):
And who's that demographic? When I read your earnings Gina and dug into the tabletop games, for example, I was really interested to read that the average consumer there for you is about 30 years old. What is the demographic more broadly on the digital side of the Wizard segment as well? 

Gina Goetter (14:59):
I mean, it's the same demographic. I mean, Chris will rattle the stat on video games better than I, but most of the people that are playing video games are 30 plus men. That's the fastest growing segment within digital gaming and within magic that the demographic is right in that mid twenties to mid thirties. We're also seeing an interesting trend where now these individuals are becoming parents themselves and are starting to bring their kids into the adventure, whether it is teaching them magic or teaching them d and d. But yeah, the growth, whether it's kiddos or whether it's this 30 plus consumer, that is where we're seeing the growth. 

Ann Berry (15:47):
And just to put in context, Gina, the operating margin you reported on this segment was close to 50%. So it's not just growth in the top line, it's very 

Gina Goetter (15:54):
Attractive. Yeah, magic is an extremely profitable business for us. Monopoly Go so is also a huge contributor to our profits. Anything that we do from a licensed standpoint, it is almost a hundred percent margin that is dropping through. So Monopoly Go had a really big quarter for us in Q1. It'll start to stabilize here. We won't see as many hockey sticks with Monopoly go as we move forward, but that combination of magic growth, I mean magic was up 46% in the first quarter. The combo of Magic and Monopoly Go, it kicked off some really nice profitability. 

Ann Berry (16:35):
When you talk about the consumer here, slightly older, I've always thought of toys as being a segment that really invokes and brings life fandom. When you're in digital gaming, you've got something else, which is a real time community, and you do have folks who tend to be quite vocal. And I did do a bit of a pop quiz. I went to the team here at Morning Brew and said, who's a fan of various brands, and a lot of enthusiasm came back around Dungeons and Dragons. You've described that earlier, Gina, as a relatively small, maybe though with outsized brand recognition, but growing, how consciously does Hasbro try to put some of these brands into pop culture? So for example, DD has been mentioned in Stranger Things that's been mentioned in community. Is that something that you have a team consciously going out there and saying, okay, how do we find ways to pop these brands in? Or is this something that's happening organically? 

Gina Goetter (17:28):
There's a little bit of both in that. I mean, our entertainment team that is part of their mandate to take our brands and embed them into pop culture. But for a brand like d and d and Magic, both of those happen a little bit more on the organic side. And you're right, the fandoms for both of those businesses, both Magic and D and d are incredibly, incredibly rich and loyal to the core tenets of the game. I am learning how to play both. So I'm learning how to play magic. Prior to this, I worked at Harley Davidson and I had a coach that taught me how to ride a motorcycle. And here I'm like, okay, well I need somebody to teach me how to play magic. And so we've been working with this individual and we posted a picture on Instagram of myself, and I have another coworker who's learning aside alongside me, and we didn't have sleeves on our magic cards, they were just the naked cards. 

(18:32)
And it was hilarious to see the feedback come through on so many people were reacting to, not that we were playing and learning the game, but that we didn't have sleeves on our cards. And please, please, please, for the love of God, go and protect those cards and get sleeves on them. So we have a very active and vibrant fan base, and we feel that everything, as I sit with the creative teams on both magic and d and d, that is at the core of their insights for products and as they're designing out the next set or the next brand that they want to partner with, first and foremost at the center of that is how the fan and how the consumer is going to think and respond to whatever we're putting out there in the world. 

Ann Berry (19:18):
Fascinating that you are at Holly Davidson, which is renowned for being one of the few brands that consumers will go and have tattooed on the 

Gina Goetter (19:26):
Themselves. As soon as you saw, I knew you were going to say that. Yeah, you tattooed the brand. Very similar. I've often commented to folks that the fandoms are very similar. I mean, I'm sure there are people with magic and D tattoos on them, and it's the same where you've got a bunch of individuals that find community and a love of a thing, whether it's riding a motorcycle or it's playing the strategic card game or getting together to do a campaign. It is the beauty of those fandoms that just fuel these brands. 

Ann Berry (20:02):
With that engagement with your community, there has been some controversy. So for example, when Hasbro tried to change the rules around who could make d and d content and the move to put more content behind paywalls that people were vocal that some folks were not happy about it, how do you balance if you want to hit your revenue goals and your growth, which you're going to have to put more content behind pay, you're going to have to monetize your content, but you also want to make it sufficiently accessible that you're bringing people. And how do you strike that balance? 

Gina Goetter (20:31):
Yeah, and you're right, it is a tricky balance and the situation that you are talking about happened right before I started in the business, and it was one of trying to do right by the brand and the business and also trying to do right by the fans and keep leaning into where the business needs to evolve. So it is absolutely a delicate balance and one that we take very seriously, and that's where I said for both of these businesses, for magic and for d and d, the fandom that consumer is at the core, and there is not a discussion that we have about anything that we're putting out into the world where we don't think through what could the impact be to our fan base. I also thought that how the company, again, it was before my time responded to that was very quick, very swift. There was an acknowledgement of, okay, that didn't work, type of response. So we're also trying to stay true to our values as well as a company as we do these things. But you're right with any business that has as vocal and visible and passionate fans that we have, it is a balance. 

Ann Berry (21:44):
And just last question on this topic, Gina, when you think about the brands that Hasbro in many ways has become the steward of, because there is this emotional connection, how do you assess new distribution channels? Let's pick on Roblox for example. How do you think about something like a Roblox, which is pretty new relative to the life, frankly, the lifespan of some of these brands and working with those? Are they high on the list to pursue or are they something you're still stepping back and assessing? 

Gina Goetter (22:11):
I think the core of our Playing to Win strategy is all about play and partnerships. And so partnerships for us are all the way from the traditional partnering with Disney as we have for all of these decades. Continuing that partnership to some of the newer companies that are on the scene, we want to have our brands available in all ecosystems because we believe in play and we believe that these partners can help us scale. So whether it be Roblox or any other of the digital assets, we will continue to partner with anyone where we think we can create that connection and that brand, brand. Love that brand resonance. We will partner. 

Ann Berry (22:59):
Going to close your note with three rapid fire questions. 

Gina Goetter (23:03):
Okay. 

Ann Berry (23:04):
So let's try it. If you could bring any Hasbro character to life, which one would it be? 

Gina Goetter (23:10):
Oh my goodness, that's a great question. I am going to say Potato Head because that one has seen the halls of this business and this building that I'm currently sitting in. I would love to know what he has to say. He's been here from the start. The stories that potato could probably tell would be pretty rich. 

Ann Berry (23:33):
Gina, you've been absolutely fantastic. Come back soon. I think there's a lot going on at Hasbro that's really, frankly, timely. Thank you for your time, macro. 

Gina Goetter (23:40):
Thank you. I appreciate it. Thank you so much. Thanks, Dean. Okay, bye bye. 

Ann Berry (23:43):
I'm Anne Barry. Thanks for tuning into After Earnings, the show that brings you up close and personal with the executives behind the world's most interesting publicly traded companies. If you learn something today, don't forget to like, subscribe, and share with your friends. Upcoming episodes will feature CEOs and CFOs from Roblox and Sweetgreen. Join us. We'll see you next time.