Some of it went to invest behind new capabilities that were aligned with strategies such as like analytics that we had talked about earlier in the year, but anything else is going against the inventory line.
Chris Cocks: Yes, I would say it’s about half for long-term, half for short term. And Megan, I think as you think about it for next year, we’ll be leaning in more, and we actively are now. And I think you’ll start seeing the flow-through of that probably in the later part of Q1 and building into Q2 and Q3.
Megan Alexander: Okay. Awesome. Very helpful. Thank you both.
Operator: Our question comes from the line of Stephen Laszczyk with Goldman Sachs. Please proceed with your question.
Stephen Laszczyk: Hey, great. Thank you. Maybe just a follow-up on cost efficiencies for Gina. You’re making some good progress on that front. Could you maybe talk a little bit more about the areas of the cost structures where you feel like you’re particularly making progress? And if there’s any potential upside to the $300 million as we go through the course of next year? And then maybe one for Chris, on digital, away from Baldur’s Gate and MONOPOLY GO!, could you talk a little bit more about the pipeline or momentum you’re seeing in other games that could potentially make an outsized contribution to growth in the digital segment over the next few quarters? Thank you.
Chris Cocks: Thank you. I’ll refer to Gina first and then I’ll follow up with digital.
Gina Goetter: Okay. So on the cost savings side, I think we’re making really good progress across our supply chain, particularly this year in 2023. Our focus has been within logistics. So the majority of the cost saves within supply chain have come through that logistics space. As we look at 2024 and potential upside to the $300 million, I’m not going to commit to a number right now in 2024, but I will commit to bullishness and our ability to deliver and overdeliver that number. There’s a few areas of focus for us as we move into next year. So within the supply chain, this year was logistics. Next year, it’s going to be more about procurement and manufacturing. So that’s — there’s some low-hanging fruit there that we’ll continue to drive after within the supply chain.
Also on complexity and just getting complexity out of the network, really focusing on our most profitable and kind of effective and efficient SKUs, taking cost out of the products as we think about designing our product and designing to value that is going to generate some good savings for us and really improve the profitability of our toy business. And then lastly, on the corporate overhead, we have made some progress on that in 2023, reducing the overall overhead structure. There is more to do there. And we will see that slow in the early part of 2024.
Chris Cocks: Yes. And Stephen, on digital, a couple of things to note. So definitely, there will be a long tail on Baldur’s Gate 3 and a multiyear long tail on MONOPOLY GO!. I think those two versus the $90 million this year will take a step back, but it’s nowhere near 100% step back. You’re probably talking maybe a 40% haircut on what we achieved this year, but tailed out across four quarters. And then we have new deals in development all the time. So I consider digital licensing a very bullish case for Hasbro. There’s a lot of demand for our IP and it’s everything from integrations with Roblox and Minecraft to a variety of new mobile games and PC and console games. And then I think as you think about beyond 2024 into 2025 and beyond, I definitely think what MONOPOLY Go and D&D with Baldur’s Gate 3 showed is there is a very, very high demand from our fans for new digital content.
We are seeing that in terms of our own internal studios and in the collaborations that we have. So Baldur’s Gate 3 is not going to be a one-off. There will be more great D&D style content and MONOPOLY GO! if it scales the way that I think it’s coming right now, that is going to be a very long-lived and lucrative game for Scopely and Hasbro.
Stephen Laszczyk: Got it. And just to make sure I got the 2024 math on Baldur’s Gate, MONOPOLY GO!, correct, it sounds like maybe $10 million a quarter in tailwind from those 2 properties, 40% of the 9-year, 300 million from this year. Is that correct?
Chris Cocks: Yes, rep and tough, that would be a decent one to have.
Stephen Laszczyk: Okay. Great. Thank you.
Operator: Our next questions are from the line of Arpine Kocharyan with UBS. Please proceed with your question.
Arpine Kocharyan: Hi, good morning. Thanks for taking my question. Going back to a little bit near term for a second. You mentioned taking share in key categories you’re in for Q4 and your consumer products business is down something like 17% implied for Q4 based on the guidance today. And even when you remove exited licenses, that’s still down double digit in underlying in terms of shipments. Does that imply lower industry POS than the 10% we’ve seen so far, maybe a little bit worse into October. But how are you taking share against that? That means the industry’s probably a little bit worse versus what you’re doing. Could you just talk to that for a second? I have a quick follow-up.
Chris Cocks: Well, I would say short-term, we have a cautious outlook on the holiday. And I think anyone who says they know how the holiday is going to go. They must have a crystal ball because this has been a tough one to predict. That said, we’re long-term goals on where is going to go. It’s a resilient category, and we definitely think it’s going to come back. For the short-term, given the unpredictability, we’re taking a cautious outlook on our view of the market and in our view of our execution. We’re leaning in, we’re going to take advantage of opportunities as they present themselves, and we think we’re going to build share as a result of that. But I don’t think we have a real solid view on where the market is going to go other than is going to be late breaking and heavily deal focused.
And the nature of it being late breaking, I think, is going to change the relationship between sell-in and sell-through. So I think replan is going to be on the later side of the holiday. And likely, if the holiday does better than maybe what our cautious outlook does, that will be a tailwind for Q1.
Arpine Kocharyan: Okay. Thank you, Chris. And then a quick follow-up in terms of operating profit structure for 2024, you’re exiting, obviously, a very low margin business with entertainment at the same time base just came down quite a bit for 2023, and you have long-term target that’s far above that 13%. Could you talk through maybe 2024 margin puts and takes as we think over the next 12 months, really?
Chris Cocks: Yes. I’ll give you a quick 20-second overview and then turn it over to Gina for the details. We see a pretty near-term snapback for our margins, given some of the short-term investments we’re making in the holiday to drive share and keep momentum going and some very solid benefits both our operational excellence program in terms of our cost structure and simplification of exiting the majority of entertainment. So I think we maintain bullishness on our ability to achieve our long-term margin targets.
Gina Goetter: Yes, the additional color I’d add to — I keep coming back to the $50 million number. That’s a couple of margin points that come back to us next year. We also have the D&D impairment that if you remember, we took that in Q2 of last year, that was a material onetime item that comes back to us. So there’s just some kind of — I would put that in the camp of accounting good guys or is that bad guys this year that become good guys for us next year that help us on the margin front? And then as we think about toy and being laser focused on improving the profitability on toy, the kind of all the work on complexity, all of the work on the cost structure on overhead, et cetera, will kind of accelerate our efforts on the margin front through the first part of next year.
