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Indiana University strengthens tomorrow's workforce with practical real world experience. IU grads make a difference in your community, serving as teachers, nurses and engineers who rise to tomorrow's challenges and meet them. Learn more at iu.edu impact, Bloomberg Audio Studios Podcasts, Radio News.
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Hasbro shares are slipping despite strong earnings and maintained outlook. The company doubling down on gaming digital franchises while navigating tariff pressures and softer consumer spending across the toy industry. The CEO Chris Cox joins us now. And Chris, it's great to have you on the program. Great talk. Hasbro again. I wonder if there's a risk that many investors don't really understand your business model and the products in which you see the most growth since they're concerned about more concerned about maybe the petroleum intensive toys with which they associate. Normally, Hasbro and the industry.
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Yeah, well, I'd certainly say we have some exposure to petroleum, but it's relatively light. The majority of our business is games, which are made of paper and frankly domestically sourced and then licensing and digital, which is just bits and bytes. So, you know, that's the vast majority of our business and the vast majority of where our growth has been coming from. And you know, you can never make promises and guarantees about the future, but when you look at a business like Magic, it's grown on average 16% per year for the last 10 years and just clocked in over 20% in our first quarter. So we're starting off the year pretty good.
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Yeah, 26% was the growth at Wizards, which because I'm familiar with the business, I have been at your headquarters, with our headquarters in Seattle as well as your headquarters here on the East Coast. I understand how much that accounts for. I think more than half of quarterly revenue and growing at a, at a, at a strong clip.
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Have it.
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Have investors just misunderstood the story of Hasbro?
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I'm not sure. I don't think.
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I'm just looking, Chris. I'm looking at the 9% or now 7 and a half percent drop and wondering why the sell off. You know, we're worried about inflation, we're worried about the consumer, but it seems like those who are buying your IP continue to do so.
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Well, I mean, I would look at a down day like today as a buying opportunity, frankly. You know, I think we have a lot of strong structural advantages. You know, when you think about Hasbro, you need to think about it being a collectors gaming and IP company. And those are all growth businesses. You know, we frame our opportunity in terms of audience and category in an acronym called GEM Squared. And so those are categories that are gaming driven, entertainment driven, multi purchase and multi generational. In 2020, five categories that we define as gem squared were up 22% versus the rest of the toy industry was down 3%. And most of our capital, most of our brands, most of our growth is invested behind those Gem Squared insights and those Gem Squared brands. You saw it in Q1 where you know, we grew 13%. You see it in our guidance where we're projecting, you know, kind of a mid single digit growth rate for the company. And you see it in the bottom line where our profits have never been stronger and our profit growth and our profit margins are some of the best in the industry.
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Chris, I think if I may, at least it seems like the analyst community's reaction is kind of what you're talking about, this idea that your growth has been so strong, 13% in the first quarter. I mean, look at last year, the success and growth of Magic the Gathering. Why is there like a slight step down to the single digits? What sort of changes as the year goes on that you don't get that like, you know, low teens growth and success that you've seen?
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Well, I think we're a diversified business. I think, you know, we always start the year with a tempered outlook about what we think the business can do. And you know, we like to, we like to, we like to under promise and over deliver, which is something that I think we've done now for nine, maybe ten quarters and consistent consistently. I think that's good for investors. I think that's good for our internal teams and I think that's good for our fans.
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We have, I guess, a bit of a fanboy in our producer Will Shaker in the control room. He's writing. Tell me about the movies, guys. So you have a big theatrical slate coming, right? Star wars, another edition there, Toy Story. I think it's the fifth one. Spider Man, Avengers. What do you expect from that in terms of toy sales, which are, you know, the, obviously the resin, the, the petroleum based products are getting hit with cost pressures, but I would imagine you'll have some pricing power as well here.
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Yeah, yeah. And we do, you know, our, we think $100 a barrel oil has about a $30 million cost headwind for us. But I think you have to look at that in the context of a business that generates 1.4 to $1.45 billion in E year. So it's a relatively manageable set of cost pressures for us that we can offset inside of a large and diversified set of Operations. And I think you're right, our entertainment slate is second to none. We've got the Mandalorian and Grogu opening this weekend. The first big new Star wars movie I think in seven years. You know, so far toy sales for that have been selling at a, at a robust clip in terms including one of the coolest toys we've ever made, the ultimate Grogu, which is a 599 doll, super high end animatronic collectible. Then we have Toy Story 5, which is always great for our official company mascot, Mr. Potato Head and his family. Those sales always go through the roof on that. Then we have Spider Man, Brand new day. Which first Spider man movie in a couple years. And you know, based on early previews that we've seen, it looks fantastic. And then we're going to cap the year off with the Avengers Doomsday, which is like bringing back all the original cast and really propelling that story forward. So I think from an entertainment perspective, certainly in the short term, we look fantastic. And I think the story only gets better in the midterm. You know, next year we have the Star Wars 50th anniversary. We have Star Wars Starfighter, we have more Marvel superheroes films. And then Hasbro's entertainment slate is just starting to cook. You know, we're going to have, you know, I think we have something like 60 projects in the Hopper. And next year we'll have the debut of our new magic animated series, which I think will help propel Hasbro's biggest and most profitable brand to all new levels.
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You should have, by the way, some kind of golden ticket game where the winner gets to see your headquarters, the wizards headquarters on, on the west coast.
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And then they get to own it and run it.
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It's, it's an amazing, it's an amaz. I was really excited to get to spend some time there. I want to just ask you finally about Monopoly because it's an age old property obviously and you've done well online digitally with Monopoly Go. But Will says there's potentially a live action feature film coming out. Can you tell us about that?
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Oh yeah, there's a live action feature film which we're partnering with Lionsgate and Margot Robbie's Lucky Chap production that's been in development now for a year or so, so that should be pretty exciting. And certainly Margot is a fantastic talent both creatively and as an actress. And then, you know, Monopoly Go. Continues to cook with gas. You know, that's the biggest mobile game in history. It continues to deliver. Like to put in context what Monopoly Go does for us, it's basically the equivalent of two blockbuster movies worth of licensing revenue per year to us. And that's an annuity that's not just a one, a one and done. That's going to be an annuity that's going to stick with us for a very long time. And I think it just shows some of the innate advantages inside of Hasbro. We're very diversified. We have toys, we have games, we have collectibles, we have a huge digital game business in licensing, a growing one in first party publishing. And then we have this great licensing business overall that spans over a thousand partnerships, over 5,000 collaborations. And you know, is like combined when you think about digital plus our physical licensing. It creates merchandising of 16 to 18 billion dollars of Hasbro branded merchandise per year, in addition to the, you know, the 4ish billion dollars that Hasbro generates per year.
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You know, I would say, like, I don't know if a Monopoly movie is for me, but I would have said a Dungeons and Dragons movie wasn't for me and I, I loved it and it was great. So maybe that says something. Chris, always a pleasure to have you on. Hasbro CEO Chris Cox okay, tech leaders,
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