Hasbro, Inc.
Q2 2017 Earnings Call Transcript

Published: 24 Jul 2017

[Operator:]

Good morning and welcome to the Hasbro Second Quarter 2017 Earnings Conference Call. At this time, all parties will be in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. At this time I'd like to turn the call over to Ms. Debbie Hancock, Vice President of Investor Relations. Please go ahead.

[Debbie Hancock:]

Thank you and good morning, everyone. Joining me this morning are Brian Goldner, Hasbro's Chairman and Chief Executive Officer and Deb Thomas, Hasbro's Chief Financial Officer. Today, we will begin with Brian and Deb providing commentary on the company's performance and then we will take your questions. Our second quarter earnings release was issued this morning and is available on our website. Additionally, presentation slides containing information covered in today's earnings release and call are also available on our site. The press release and presentation include information regarding non-GAAP financial measures. Please note that whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share. Before we begin, I would like to remind you that during this call and the question-and-answer session that follows, members of Hasbro management may make forward-looking statements concerning management's expectations, goals, objectives and similar matters. There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. Some of those factors are set forth in our Annual Report on Form 10-K, our most recent 10-Q, in today's press release and in our other public disclosures. We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this call. I would now like to introduce Brian Goldner. Brian?

[Brian Goldner:]

Thank you, Debbie. Good morning, everyone and thank you for joining us today. The Hasbro team executed another strong quarter. Story led brands and innovative brand experiences drove double-digit revenue operating profit and earnings growth, brands that connect with global audiences and consumers in a meaningful way through story and informed by consumer insights are the brands that retailer support and they are the brands that our consumers engage in across our Brand Blueprint. Quarterly revenues grew across all major regions, including growth in many developed markets such as the U.S. Canada, France, Spain, Australia and Mexico. Emerging market revenues increased 7% led by growth in China and Russia. We also began operating from our new office in India. While most countries are performing well, the U.K. and Brazil are facing challenging macroeconomic issues impacting both consumers and retailers. This is having a near term impact on our revenue and operating profit in the international segment but our full year outlook for this segment is positive. On average, 90% of our operating profit in the international segment comes in the second half of the year and while we expect both countries to face challenges going forward, the rest of the markets have been performing well. Global point of sale increased in the low teens for the quarter and through the first six months of the year. North America and Europe POS also increased double-digits in the second quarter and first half. According to industry data through the month of May Hasbro remained the number one company across the G11 countries. On a reported basis Hasbro franchise brands revenues increased 21% with growth in TRANSFORMERS, MAGIC

[Deb Thomas:]

Thank you, Brian and good morning, everyone. The Hasbro team delivered a strong second quarter with double digit revenue, operating profit and net earnings growth. Operating profit margin increased 60 basis points on higher revenues, favourable mix and expense leverage. The 30% growth in net earnings delivered $0.53 of earnings per share. As forecast, Hasbro’s adoption of the new accounting standard governing stock-based compensation contributed approximately $0.01 per share. Our outlook for both the third and fourth quarter is positive and we have strong consumer momentum heading into the second half. Given the timing of entertainment this year, the rapid growth of e-commerce and our global retailers focused on just in time inventory. Our expectation for quarterly revenue is a shift to later in the year. As a result, we believe the fourth quarter could represent a greater percentage of full year revenue than historical norm and may be greater than the third quarter. For the second quarter, revenues in the U.S. and Canada segment increased 16%. Growth in franchise brand, Hasbro gaming and partner brand revenues offset a decline in emerging brand. In total, U.S. and Canada point of sale increased double digit through the quarter in the first six months of the year. Retail inventory is of good quality. Operating profit in the U.S. and Canada segment increased 41% to $81.6 million or 16.5% of net revenue. The 290 basis point year-over-year improvement was the result of higher revenues, a favourable mix led by growth in MAGIC

[Operator:]

Thank you. [Operator Instructions] Our first question is from the line of Steph Wissink with Jefferies. Please proceed with your question.

[Stephanie Wissink:]

Thanks, good morning everyone. Just a couple of follow up questions, and thanks Deb and Brian for the details. I’m curious about Brazil or the U.K. if you can just help us diagnose a bit more about what’s happening in those markets and if it seems a bit more transitory how are you expecting those markets to develop in the back half. And then I think secondly, and this is admittedly I think an error on our part, but just understanding the entertainment and licensing related revenue timing, think Deb you mentioned there’s a deferral by a quarter or so when the revenue is received at retail then you are collecting a royalty, but just remind us how we should think about the timing lag on when your major franchise brands of Ventar [ph] and then the consumer products inbound licensing and the timing on that? Thank you.

[Brian Goldner:]

Yes, good morning Steph. The U.K. business definitely has had some macroeconomic issues, you see it in the NPD data and our business has been relatively flat in the quarter from a POS standpoint. But overall, if you look across Europe, we have double digit POS growth for both the quarter and year-to-date. So we really view the U.K. being a bit Brexit focused. We have a little bit of our retail concern out there, but again I think it’s something the teams have worked through quite well and I don’t see it as a long term issue. In Brazil similarly you have a macroeconomic situation, a little bit political instability and consumer confidence that’s changed a bit, but still if you look at the emerging market growth for the quarter was about 7% year-to-date emerging market growth is 12% and so we are seeing some good growth across emerging markets. So I would say both of those are issues the teams are working through and I would expect that over time we’ll work through that. Again, same thing there where Latin America, the rest of Latin America has performed quite well and we would expect that market, the region overall to perform quite strongly.

[Deb Thomas:]

Good morning, Steph. For entertainment and licensing, typically when we have consumer products sales we work with external third-party licensees who take that product and make the T-shirts and backpacks and all the great things that are sold around our brands. Their revenue at retail for example could be in the second quarter, they wouldn’t report that to us until early in the third quarter. So generally what we see with that is it’s about a quarter in arrears from when the sales actually occur at retail. With our entertainment this year with TRANSFORMERS coming out in June and we have MY LITTLE PONY movie coming in October, we would expect to see some of that revenue in the fourth quarter for example for Pony, but more of it in the first quarter. So with consumer products you tend to see a little bit of a shift that revenue can be larger in the first quarter than it typically is in other segments because of that.

[Stephanie Wissink:]

Thank you. Just one quick follow-up on the inventory, Deb. Are you feeling that the inventory closeout situation is essentially in the rearview mirror now we can look forward? Or is there anything that we should expect in the third quarter with respect to the international margins?

[Deb Thomas:]

We have closeouts typically throughout the year, and as we said with all the entertainment coming midyear and later in the year we really took advantage of kind of cleaning that inventory up now, and making sure that as we headed into the heavy entertainment season which typically you may see the higher closeout level in the third quarter. It doesn’t have as big of an impact on margins just because of the size of the revenue and everything overall. So, we did take advantage of that. On a full-year basis we think that we will not be unusual compared to a normal year, it's just really a timing shift.

[Stephanie Wissink:]

Thank you.

[Operator:]

The next question is from the line of Drew Crum with Stifel. Please proceed with your question.

[Drew Crum:]

Okay. Thanks. Good morning everyone.

[Brian Goldner:]

Good morning.

[Drew Crum:]

Guys, there seems to be this narrative that movie properties didn’t performed to expectations during the quarter which seems to be at odds with your commentary on the TRANSFORMERS franchise. Could you address how you see the company position for the second half in terms of inventory levels and shelf space retailers intend to dedicate to your brands as it relates to entertainment?

[Brian Goldner:]

Sure, entertainment continues to drive our business, Drew. And if you look at TRANSFORMERS, recognize that we now have entertainment across multiple screens and in fact our targeting and presenting stories to a infinite number of demographics around the brand, so certainly TRANSFORMERS

[Drew Crum:]

Okay. Thanks for that color. And then separately, the EBIT margin looks like it’s down just 20 bps year to-date, can you update us on your expectations for 2017 relative to last year. I think you had previously suggested operating profit margins would be lower versus the adjusted 16.4% you reported last year?

[Brian Goldner:]

We continue to expect operating profit margins for the full-year to be up versus the adjusted number as reported number - what.

[Deb Thomas:]

The reported number.

[Brian Goldner:]

…yeah, the as reported number, sorry. So we continue to expect operating profit margins to expand versus as reported. If you look at EBITDA for the first quarter, it was actually up 19% year-to-date, it’s been up 16%, so we’re getting really good strong earnings growth in the business. And again we expect operating profit margin expansion for the full-year.

[Drew Crum:]

Okay. Thanks guys.

[Operator:]

Our next question is from the line of Felicia Hendrix with Barclays. Please proceed with your question.

[Felicia Hendrix:]

Hi. Good morning. Thanks. Can we just go back to TRANSFORMERS for a moment Brian, because you have mentioned in your comments the strength of Global POS and that is up significantly year-over-year, and against the 2014 movie? So, I’m just wondering if we could take those comments and translate those into absolute dollars. Would it be fair to assume that THE LAST KNIGHT could generate revenues higher than the 2014 movie, which I think you said at the time was kind of in line with the 2011 movie?

[Brian Goldner:]

Yes. I think the way to think about TRANSFORMERS and in fact it's emblematic of what we’re doing across the company. Over the last three years we have developed the digital capabilities for stream content and putting content on a multitude of screens, that capabilities really being born out and being seen in the TRANSFORMERS business. So, the overall brand is performing at a much higher level than it was in 2014. In part, that's because the movie product is performing at a higher level than the prior year movie product in 2014, but also because we are seeing great growth in the TRANSFORMERS generations product for the fan economy, the Robots in Disguise product that's been around the television. Television viewership is strong. Our streaming on Netflix is a very strong. And then of course the fan-oriented stream product that goes -- our content that streams with machinima.mcn [ph]. So, I’d look at it as an expansion of storytelling. And again the brand did perform quite strongly in 2014 but also performed strongly in 2015 and 2016. This is clearly more in line with the movie or performance for the brand.

[Felicia Hendrix:]

Okay. So just to make sure, I understand like movie to movie it seems like the movies better and then you layer on kind of everything you do with your brand blueprint and how you kind of expand brands and then putting it off together, the franchise in general has grown, but the movie also seems better?

[Brian Goldner:]

Yes, it is. Its – the performance is good. Remember that movie has continued to form incredibly well globally outside the U.S. where I think we just surpassed $225 million in China. The movie has done more than $550 million so far. And also with all of our entertainment digital engagement, yes, we are up significantly in POS versus the prior movie year. And yes, it's being -- it's coming from a number of new areas for us, capabilities that we've developed over the last three years.

[Felicia Hendrix:]

Okay, great. And then, Deb this is probably a question for you. You guys touched a bit on what is going on in UK and Brazil, but just wondering specifically can you call out how much that impacted your performance in the quarter?

[Deb Thomas:]

Well, we typically don’t call out separate countries, but what I can say is if you look at in our table both Europe overall and Latin America overall did grow revenue in the quarter. So whilst individual countries are impacting us. Overall as we look at the region and how we’re performing across the region, they did grow in the quarter.

[Brian Goldner:]

Yes. I think the other thing to note in the operating profit it’s a log [ph] small numbers. Typically our European profit 90% of it is around the second half of the year that has to do with the footprint that we run, size at geographies and the fixed expense that we have in the first half of the year. So I would view it as a small change that doesn't really portend anything on the full-year.

[Felicia Hendrix:]

Okay. And then, just help me understand the partner brands declines internationally, if that again due to kind of timing or how much of that was related to U.K and Brazil?

[Brian Goldner:]

That’s more about timing.

[Felicia Hendrix:]

Okay.

[Brian Goldner:]

It just has to with coming off of a STAR WARS movie year entering into a new STAR WARS entertainment era and then MARVEL really hitting in the second quarter particularly Spiderman in the second quarter. So it’s really, I view as timings because MARVEL overall was up for the quarter.

[Felicia Hendrix:]

Okay. So when we look at partner brands internationally for the second half that you shouldn’t see declines?

[Brian Goldner:]

Well, I think that you have a lot contributing in partner brands in the second half. You have Princess which grew in the quarter and it has a lot of activity in the second half. You have MARVEL which has a tremendous amount of activity. You have the new STAR WARS movie and Force Friday II that sets on September the 1st. So overall – well, of course we still have TROLLS which is contributing quite strongly year-to-date and we’re very excited about the full-year on TROLLS. BEYBLADE, some of you’ve asked about BEYBLADE timing. And that of course is really just entering both Europe and Latin America in the second half of this year, really hadn’t been in those markets. So I think all those elements will contribute to the second half of the year.

[Felicia Hendrix:]

Great. Thanks for the help.

[Operator:]

Thank you. Our next question is from the line of Eric Handler with MKM Partners. Please proceed with your question.

[Eric Handler:]

Yes. Thanks for taking my question. Two questions for you guys. First, as online becomes more and more important every year, just curious with the Amazon Prime day, did you do anything special unique with the marketing around that? And how significant -- is this day significant at all for you? Then secondly with regards to STAR WARS in terms of your orders or what you plan for ship in, how is that comparing to the movie two years ago the Force Awakens?

[Brian Goldner:]

The Amazon Prime clearly is a very big day for them and it's a very fun day for us and opportunity to do lots of interesting and fun promotional elements run our business. It was again a strong day for the company. Our overall online POS was very strong in the quarter, stronger than our overall POS and up more than 20%. We continue to see great growth in online and omni-channel not just from Amazon but the Wal-Mart target and Toys "R" Us as well, very strong growth for several of those retailers. It's for us an opportunity to bring together content commerce and innovation online and it's working quite well the way we’re executing around the story led brands is quite strong for us. So overall, POS was up double digits in the teens for the company and even more strongly online. As you look at STAR WARS for the year, clearly if go back in history I'd say you have STAR WARS movie years and STAR WARS non-movie years, these categories both contribute significantly, certainly the movie years more so and this is clearly lining up to be a very good STAR WARS movie year. Obviously, as we get into Force Friday we’ll know a lot more, but certainly there's nothing about our business so far this year that wouldn’t indicate a very strong STAR WARS movie this holiday and the strong Toys sells for us.

[Deb Thomas:]

As far as the timing questionnaire, one of things that we are seeing with the growth in online retailing and our retailers taking more just-in-time inventory, as Brian mentioned we’ll see more when we get to Force Friday II which is on September 1st of this year. But again that’s late in the third quarter and we think with everything that’s kind of coming together we may actually see a bigger fourth quarter than third quarter this year just -- really just timing and some of the patterns were seeing right now.

[Eric Handler:]

Great. Thank you very much.

[Operator:]

Thank you. Our next question is from the line of Arpiné Kocharyan with UBS. Please proceed with your question.

[Arpiné Kocharyan:]

Hi, thanks. Could you perhaps walk us through the puts and takes for gross margins. It seems like with 94 million of incremental revenue, gross margins were big soft. And I do understand entertainment licensing being down, doesn’t help margins, but then you had strong MPG [ph] and overall franchise and gaming growth which are margin accretive versus partner brand. Could you just walk through some of the puts and takes there? Thank you.

[Deb Thomas:]

Sure. Good morning, Arpiné. Really we talked about -- the biggest impact on the gross margin line for the quarter was the level of closeouts sale. For closeouts sale typically carry a lower gross margin as they come through, and they also carry lower advertising and all other costs. So, there’s not a lot of promotion around and a things like that. So why you see it in the gross margin line that’s why you see our operating profit did increase from a percentage standpoint because it impacted that but not the way down. So that size-wise was the biggest impact. The next biggest impact was less favorable hedges that we had on inventory we purchased in the second quarter this year various a year ago. And we set a Toy Fair that that was going to impact our full-year gross margin and that overall we expect our full-year gross margin to be down a bit from the full-year 2016. So those are really the two big items and they offset the positive product mix that you mentioned earlier.

[Arpiné Kocharyan:]

Okay. Thank you. And then a quick follow-up, Brian, you mentioned Disney Princess revenues were up in the quarter. Just wondering if it’s still up if you do year to-date and move out for Easter shift, could you share how much, if that’s the case if it’s up year to-date? Thanks.

[Brian Goldner:]

Yes. Disney Princess, yes, I’ve looked at Disney Princess together would be up year to-date and I'm not going to size it, but its up in both the quarter and year to-date for us. And look there’s a lot of great entertainment that’s been supporting that brand, and Moana and the electronic sell-through and DVD windows, Beauty and the Beast. So yes, that's -- it's been up and we would expect with the kind of entertainment we have coming in the second half and Olaf's Frozen Adventure to contribute to our both Princess and Frozen business for the full-year.

[Arpiné Kocharyan:]

Great. Thank you.

[Operator:]

Thank you. Our next question is from the line of Tim Conder with Wells Fargo. Please proceed with your question.

[Tim Conder:]

Thank you. Just a couple of here. Deb, on FX given the recent weakening of the U.S. dollar year-to-date overall and the hedges that you have in place, do you see any changes in the back half of the year here as it relates to the FX guidance that you outlined at Toy Fair?

[Deb Thomas:]

Well, we really set our hedges, so we can put predictability in our pricing. So, based on the hedges we have we’ve been able to set pricing for the year and give our retailers confident in maintaining that pricing, as well as understanding what our gross margin is. So I think about the rest of the year -- last year for a full-year we were about 74% of our total costs with hedge. This year I think we’re about 73% like we’re right around that range. So to the extent we haven’t hedged, we should get some benefit from it, but on a full-year basis we -- again we really hedge to protect the pricing that we offer to our retailers.

[Tim Conder:]

Okay. So maybe a little bit but not a lot here, okay. Okay. And then on the profitability of the online versus the brick-and-mortar, I think you’ve said at Toy Fair that there was a little bit of difference but you anticipated that to narrow. Just maybe revisit that and a little color there? And then you’re shifting from Q3 into Q4 on the revenue side that you're looking to, should we expect a proportionate shift in profitability also?

[Brian Goldner:]

Well, I think we’d expect a nominal shift in revenues between third and fourth quarter. We’re not suggesting that it’s seismic, but just a nominal shift as a result of all these entertainment initiatives that are happening toward the back half of the year and particularly in the fourth quarter as STAR WARS comes out in December. On online, what I’d said was that our cost of business was very similar. The difference is as we develop our expertise in online we have some initial costs over the first couple years as we set ourselves up for future growth and that we would expect those costs over time to begin to diminish that has to do with the kind of packaging we use in the way we create master cartons in the way that we go-to-market, the kinds of content we’re creating. But overtime we’ll amortize those startup or learning curve costs and that we would expect that to continue to be over time accretive to our business, but today comparable cost of business to Omni-channel or brick-and-mortar.

[Tim Conder:]

Okay. Okay. And then lastly I think if I’ve heard you correctly you called out not only the UK and Brazil, but a little bit of weakness in Germany. Just maybe a little bit more color there?

[Deb Thomas:]

Really Germany on which really around the quarter and we don't expect that to continue for the full-year. It’s really the UK and Brazil that we’re seeing most of the economic issues.

[Tim Conder:]

Okay. Okay, great. Thank you all.

[Operator:]

Our next question comes from the line of Michael Ng with Goldman Sachs. Please proceed with your question.

[Michael Ng:]

Thanks for the question. I have a question on gaming. Its look like gaming revenue, with franchise brands was up $45 million in the quarter with non-franchise brands up only eight. So it seem like a lot of the growth is driven by MAGIC and MONOPOLY. I was wondering if you just frame how much of that growth is simply from MAGIC cards at timing versus core MAGIC growth. And how much is coming from MONOPOLY? And then I have a few follow-up?

[Brian Goldner:]

Yes. Overall the games category was up by 20% in the quarter and then if you look at – Hasbro Gaming was up 6%, but I think it’s important to note that in the second quarter globally our games POS was up 27%. So we are seeing a tremendous sell-through of our games business. Similarly in U.S. our games POS was up quite considerably. So what we’re seeing is really a matter of game selling very well, shipments are little bit behind the sell-through, lot of new games introductions coming later in this quarter for the second half. Dungeons & Dragons is performing at a very high level. I think Dungeons & Dragons is back and the team has done some very expansive marketing around that. It's involved in e-sports and twitch [ph] new gaming launches coming throughout the year. And then, of course you also see our digital gaming business growing considerably. With TRANSFORMERS, EARTH WARS are performing quite well, DragonVale performing well, so Backflip Studios is really contributing as well on the quarter. So it’s both digital gaming, as well as face-to-face gaming performing well in the quarter, so that's both the in the gaming segment and then overall performing quite well. MAGIC on a full-year basis, really the business continues to resonate with making a lot of progress in the MAGIC online and our Digital Next, we’re looking forward to showing you more in the Digital Next development at our Investor Day. But MAGIC online is performing very well, holding up quite well and you’re seeing more concurrent launches like Amonkhet was a concurrent launch between our card set as well as our online and we continue to connect with players. We’re seeing great new player engagement as well as conversion, continue to see the kinds of torment play and the e-sports play and viewership that really gives us good signals for that brand long-term.

[Michael Ng:]

Okay. Thanks. And I just have one on Princess and one on capital allocation. I think in the past you mentioned that Princess margins are below company average? Can you talk about your outlook for those margins as you continue to scale that brand and how long you think it will take to become run rate margin? And then, on capital allocation…

[Brian Goldner:]

Yes. I’m sorry, go ahead.

[Michael Ng:]

And then just on capital allocation. You reaffirm $150 million buybacks for the year, but didn’t buy back any shares in the quarter. Can you talk about how you are thinking about that and whether there were some upcoming use of the cash alleged you do not buy any shares this quarter?

[Brian Goldner:]

Yes. So if you look at Princess, we’d said from the beginning that investments would begin before the revenues spend and the investments continued in early days as we launch that brand we continue to invest in the brand and we do continue to see profit improvement over time. And we had said then and continue to reiterate that we’d see profit improve over a two to three-year period and begin to approach company average operating profit margins for our partner brands over that period. And that's still the case.

[Deb Thomas:]

And as far as capital allocation, as we said we want to return access cash to shareholders and indeed most of it was through dividends this quarter and we repurchase shares subject to market conditions and available U.S. cash. We also put [Indiscernible] five ones in place in our close windows and our stock price had quite a bit of movement in this past quarter. So, we still have about 300 million left in our share repurchase authorization and still plan right now to repurchase 150 million on a full-year basis, it will just be more back half weighted at this point.

[Michael Ng:]

Thank you very much.

[Operator:]

Our next question comes from the line of Linda Bolton Weiser with D.A. Davidson. Please proceed with your question.

[Linda Bolton Weiser:]

Hi. I think you’ve spend a lot of commentary or thought out there about the potential for the whole play industry in the U.S. to slow in growth because the growth has been pretty strong in the last few years. Do you have any thoughts on there in terms of what the drivers have been or whether those drivers can continue? And then, do you have any industry numbers to give for the quarter or year to-date in terms of growth?

[Brian Goldner:]

Our overall industry would grew just under about 4%, obviously our growth is outstripping that growth. In the U.S. the team has done a fantastic job with double-digit growth. We continue to see the opportunity to grow that business, continue to engage in it with the number of retailers continue to expand and stretch our channel management and through that channel management strategy we’re getting to new and differentiated retailers with different types of products and offerings. The online business continues to be disintermediary for us, for example, if you look at our online sales in the quarter particularly focused on U.S. you see very strong double-digit gains for all of our franchise brands and that's quite heartening to see that the MY LITTLE PONY and little Scratch [ph] up performing well as we’ve start to introduce new product where the audience can find those brands online at their liking. So, I’d say overall we continue to expect that the U.S. business, the North American business can grow. We’ve certainly seen that growth and expect that the retail calendar with entertainment continues to stretch to be more full-year calendar. And we have a number of initiatives for the second half of the year that set us up quite well for a full year, and also into 2018 we’re seeing a number of entertainment initiatives including our own that set us up for 2018 to be a very good year as well. So that's what I think about the U.S. business. I think you look at it our developed economies business in the first quarter grew 12% while emerging markets grew 7% and for the first half our developed the country's business grew over 5% while emerging markets grew double-digit and so I would say that we’re continuing to see very good growth both in developed economies and emerging markets.

[David Quezada:]

Thank you.

[Operator:]

The next question is from the line of Gerrick Johnson with BMO Capital Markets. Please proceed with your question.

[Gerrick Johnson:]

Hey, Good morning. I have three here. First, consumer products you said it was flat. Can you tell us which of your franchise brands generated growth there and which saw declines?

[Brian Goldner:]

In the quarter we’ve seen very good performance from MONOPOLY. We’ve seen good performance from TRANSFORMERS. We’ve seen good performance in MAGIC. I think Pony was off just a bit the quarter. And as we set up and key [ph] up the second half around the movie again on the full-year basis we think MY LITTLE PONY will perform quite strongly. And remember what Deb said earlier was that the consumer products royalty income comes in the quarter after the sales occur. So I think that a lot of what's going on the consumer products is just related to the timing.

[Gerrick Johnson:]

Okay, understood. You mentioned timing of shipment of the reason for accounts receivable being up. What caused that?

[Brian Goldner:]

Well, first of all, we’ve seen great growth in a set number markets where we have longer dating in Latin America for example Mexico has seen great growth and the dating there is a bit longer.

[Deb Thomas:]

Yes. In India we just started opening our own business in India. So it's really just a function of timing for us. Then we also talked about closeouts. Some of the sales as I mentioned there are a lower rate but they don't carry any allowances or things like that that may reduce receivables further. So it really is about timing for us this quarter. Inherently our receivables are in great shape, Our collection are good and through last week we collected on the 20% of our receivables. I think I looked at it Wednesday and we were already at point. So we’re in good shape on receivables. Its really just about timing.

[Gerrick Johnson:]

Okay. And you mentioned closeouts which is nice segway into my final question. Can you give us your global North American POS at retail since that way the industry measures it?

[Brian Goldner:]

So, our POS, global POS in the second quarter was up by 13% and year to-date its up of about 14%. And then has had games POS globally was up by 27% and U.S. was even more stronger 33% and you’re seeing double-digit growth across a number of categories. Where we have a breakdown franchise brands we have double-digit partner brands was up strong single-digit and gaming as I mentioned was up, online sales I talked about being up more than 20%. And then, of course I also earlier in Europe that we saw the double-digit POS games and very strong gains in a number of markets. And as I mentioned that UK was the only place where the POS was flat and we’re holding our own in industry category that’s down a bit.

[Gerrick Johnson:]

And to be clear Brian, it’s all measured at retail or is that all at wholesale or were just [Indiscernible]

[Brian Goldner:]

That’s our measurement and wholesale, that’s what we have as POS.

[Gerrick Johnson:]

Right. But the question was at retail, because that’s how the industry measures.

[Brian Goldner:]

Yes we don’t the retail data, we don’t get that retail data by all those markets, we get wholesale data by all those markets.

[Gerrick Johnson:]

Okay, thank you.

[Brian Goldner:]

Yes.

[Operator:]

Thank you. I will now turn the floor back to Debbie Hancock for closing remarks.

[Debbie Hancock:]

Thank you, Rob and thank you everyone for joining the call today. The replay will be available on our website in approximately two hours. Managements’ prepared remarks will be posted on our website following this call. As Brian mentioned, we look forward to seeing you at our Investor Day on Thursday August 3rd in our West Coast offices in Burbank, California. And finally Hasbro's third quarter earnings release is tentatively scheduled for Monday, October 23. Thank you.

[Operator:]

Toda’s conference has concluded. Thank you for your participation. You may now disconnect your lines at this time.