I think you can buy Hasbro. I found all of the explanations for the decline of the toy maker's stock to be pretty compelling. Inventories had gone up by more than 40%, and the chatter was how it must be long a lot of old Star Wars merchandise, because it said Star Wars sales would be flat.
But we heard from CEO Brian Goldner that a lot of that inventory is for toys not even introduced yet. How can that be bad inventory? That, to me, is good inventory, being readied for a big holiday season.
It is true that the Jurassic series is leaving the stable and that Transformers was weak. But other than that, I heard a lot to like -- and you would be selling now ahead of a full movie roster, including a new Star Wars, which might make you take a pause to reconsider. Plus, I am pretty sure you would be selling right into the more-than $400 million buyback that the company is going to put to work into the weakness.
I think that this is a case where the stock had run up more than 25% going into the quarter and a slowing of the boys category is spooking people. I am not in denial that the boys category is weaker, I just believe that it is transient in nature.
Perhaps more cogently, go look back at when Mattel (MAT) last reported. It was a total bomb, with a big miss by the keystone Barbie franchise.
The stock is now above where it was when it reported the weak quarter. It has nowhere near the coming catalysts that Hasbro enjoys.
Netflix? What can I say? I am truly struggling with the whole "ungrandfathered" thing. I am always wary of words that spellcheck won't check off on, and this was one of them. It dominated everything on the Netflix call last night, namely that as price increases were finally about to occur for subscribers, the ones who had been grandfathered in, they didn't re-up. Price mattered. In other words, it seemed as if fear of a pending price increase is what made U.S. numbers so weak -- a total of only 160,000 more subs than the last quarter. I found myself thinking, at least they didn't lose any.
Price has not mattered before this quarter. Netflix was part of the holy trinity of memberships we will pay more for, along with Action Alerts PLUS holding, Costco (COST) and Growth Seeker holding, Amazon (AMZN) Prime. That's no longer the case.
But we don't know why these ungrandfathered people really decided not to re-up. And it seemed that Netflix didn't get it, either. I have read over the comments by this team multiple times now, and I still can't figure out why people aren't re-upping. It's just not that much money versus, say, your cable bill.
I just don't get it. I didn't get the last miss -- when Netflix pinned the lion's share of the blame on Australia. And I didn't get it the previous quarter when they said that there was an issue with credit cards the quarter before that. But I was willing to overlook each one because I knew that people loved their Netflix.
Now, I am not so sure. You just shouldn't be getting this level of Netflix cutting. And it isn't being made up overseas, as it had been.
In short, this was the classic kind of bad quarter that can't be bought, because management didn't give you a reason to do so. Yes, it kept guidance for next year, but after three straight quarters of misses, you can't get in front of it until we get through the ungrandfathering, which isn't until the end of the year.
I finished the call dazed and confused. If you weren't dazed and confused too, I have only one thing to say to you: You weren't on the Netflix conference call. You were on a different call, from a different company. Or, perhaps, you were listening to an old call, when the idea that someone wouldn't pay up for Netflix was inconceivable. Not anymore.