> > My ARTI calculation from 2011 came out to 1.57%, which is very low. This
> > tells me that Hasbro has done some VERY smart things to manage cost growth.
>
> Okay, so what is it that we're not seeing? I mean, we as consumers are noticing things like molds getting recycled endlessly, lack of paint operations, cheap-feeling, lightweight plastic, Lee Press-On Wheels, etc. We're clearly never going to see the end result of other factors you mention, like how Hasbro transports their shipments, or health care for the Hasbro employees (and I noticed that since you added a "+++" after it; does that mean you think this is the single highest factor of rising costs?).
Lee press on wheels... hilarious, but not funny at the same time. So, I don't think anything has really escaped us (if it has, we wouldn't know - right?), who are their most discriminating customer by FAR. But I would be willing to bet that 95% of their customers would have no idea what a Lee-Press on wheel is (I love it!), or care if you pointed it out to them. From a purely business perspective, this makes a ton of sense. I'll give you an example from the automotive industry. My wife used to drive a Ford Expedition. The car had leather interior. On the front seats, side facing the middle console, the sides of the seats were not made of leather, but carpet fabric. When I noticed it, I was instantly furious (cheap American bastards!!!) But then, I sat back and realized, how many Ford Expeditions are on the road.... This little short cut that most people (including my wife) wouldn't notice saved them MILLIONS in leather material costs.
Don't get me wrong, I am not endorsing it, but it does make good business sense.
> I'm fascinated by stuff like this, but I admit that I don't have the background in economics necessary to fully appreciate all the factors involved.
I would highly encourage you to spend some time reading through Hasbro's 10-K SEC filing, which is their annual report. If you can muscle through the dry parts, you will find some truly fascinating information. Here are some excerpts to wet your appetite:
-Hasbro made $415,000,000 in 2014, and paid $127,000,000 in taxes.
-"Wal-Mart Stores, Inc., Toys "R" Us, Inc. and Target Corporation represented 16%, 9% and 8%, respectively, of consolidated global net revenues, and sales to our top five customers, including Wal-Mart, Toys "R" Us, Inc. and Target, accounted for approximately 38% of our consolidated global net revenues. In the U.S. and Canada segment, approximately 59% of our net revenues were derived from these top three customers. "
-"At December 28, 2014, we employed approximately 5,200 persons worldwide, approximately 2,700 of whom were located in the United States. "
-"a few of our products, such as the food mixes for our EASY-BAKE ovens, are also subject to regulation by the Food and Drug Administration. "
- "The challenge of continuously developing and offering products that are sought after by children is compounded by the sophistication of today's children and the increasing array of technology and entertainment offerings available to them. "
- "During 2013, the Company was involved in a dispute with an inventor related to the contractual interpretation of which products are subject to payment of royalties under a license agreement between the inventor and the Company which was adjudicated in binding arbitration. The arbitrator ultimately issued a ruling which awarded $70,046, including damages, interest, fees and expenses to the inventor. In February 2014, the Company and the inventor settled claims arising from or relating to this license agreement related to the NERF product line and a license agreement between the parties relating to the Company's SUPER SOAKER product "
- page 33 has a breakdown of their cost structure. "Cost of Sales" is far and away their biggest cost driver. This is primarily the cost of their people (including the health insurance I got so excited about, Hasbro also has a sizeable pension liability) Their Cost of Sales is Four times their costs for advertising, and EIGHT times their cost of product development. It looks like redesigning toys maybe isn't that expensive?
>
> > For the most part, I think we on ATT notice their cost cutting approaches,
> > which are sometimes quite brilliant.
>
> You're right that we're probably far more likely to notice when pennies are pinched than your average consumer. I'm curious to know which measures you consider brilliant, though. I don't mean that in an argumentative way; I'm geniously curious to know.
Sure. So, see my lee press on wheels example, which from a purely engineering standpoint is very smart. Cheap to manufacture AND assembly time is reduced. Also, I find it interesting how they are constantly fiddling with packaging. I imagine this is a sizeable cost that can be controlled up to a point. Buried in their 10-K, I also found this little gem, which probably explains a lot of what we have been seeing in the past few years. They put this stuff in to get shareholders excited. $100M is a HUGE amount for a relatively small company such as Hasbro.
"To improve our profitability and competitiveness, in the fourth quarter of 2012 we implemented a global cost savings initiative. The objective of this initiative is to reduce our underlying operating costs by an annual gross amount of $100 million by the end of 2015. " (Top of page 22)
Check it out and let me know if you see anything interesting:
http://investor.hasbro.com/secfiling.cfm?filingID=1193125-15-64946&CIK=46080
-Banzaitron