So when you think about the people cost as well as just broader managed expense savings, that becomes an adder back for us as we think about 2024. And the last piece that is positive is just the overall mix of our business. So not only within [WATCI] where we have this continued mix into digital, but within the CP business as well, when we again took out those actions from a closeout standpoint, the volume that we’re going to be moving through in 2024 is higher profit volume for us. So those are some of big puts and takes. Really the big negative for us as we head into ‘24 is just what’s happening on the revenue line and the impact that that’s having.
Arpine Kocharyan: Great. Thank you. And then, Chris, you have talked about $500 million of D&D business over a three-four-year period. I was wondering if that’s still the guidance for D&D. I know you addressed some of that earlier, but if you could just go over kind of the long-term growth prospects for that business in terms of sizing it for us, similar to how you guys communicated in October Analyst Day. So kind of, I know you’re not ready to update that guidance, but just sort of, is that $500 million still the right numbers to think about? Thanks.
Chris Cocks: Yes, no worries. Hey, Arpine, by the way, I heard you have a new child. Congratulations.
Gina Goetter: I think like I control the baby.
Arpine Kocharyan: Thank you. I appreciate it.
Chris Cocks: We always appreciate it when people make customers.
Arpine Kocharyan: Indeed.
Chris Cocks: I would say that guidance holds. The D&D brand and our games portfolio overall is trucking along at a similar pace as we expected. That guidance was more of a 2027-ish timeframe. I think a little bit will depend on certain calendars associated with certain video games and there’s a certain amount of schedule slippage that you get with that. But generally speaking we feel good about the trajectory of the brand and as I mentioned in Eric’s question kind of like the three core pillars that underlie it.
Operator: Our next question is from the line of Megan Alexander with Morgan Stanley.
Megan Alexander: Hi, thanks very much and thanks for all the detail. It’s really helpful. I was wondering, Gina, if maybe we could unpack the revenue guidance for consumer products just a bit more. You cited those four points from exiting the licensing. Maybe you can help us understand what’s implied from an industry POS expectation and I guess is the comment that retail inventory is not a headwind or a tailwind. Should we assume that you’re just kind of shipping in line with POS?
Gina Goetter: Yes, that, good question Megan and that’s where I was going to lead you. Just especially given where our inventory positions are sitting, our assumption that we’re making is that our shipment is going to more closely align with POS. In fact, we actually started to see that happen towards the tail end of this year. So do you think about the guide that gives you an indication of how we’re thinking about the broader macroenvironment. So you take those, call it roughly four points out for just the business exit. You’re laxed with down three to eight. In the down three scenario that would be us over delivering and getting share and beating the market. Down eight is probably more similar of us moving in line with the market. But I think you’ve got the equation right that our shipments are going to more closely kind of align with our line of POS.
Megan Alexander: Okay. And then could you maybe quantify the net cost savings that are embedded in the guide? I think for your slides you’re going to get to kind of $500 million of gross cost savings by the end of this year. You’ve kind of said you haven’t really seen any last year. So on that call it net, $250 million if you can reinvest 50%. What’s embedded this year? And I know you talked about some cost inflation. Is that freight? Are you still seeing, product inflation, whether it’s things like resin? Can you just maybe quantify what is actually embedded in the guide?
Gina Goetter: Sure, absolutely. Let me start on that — let’s start on the inflation side first. I know we’ll work our way back. So embedded in the guide is roughly an inflation rate of 3%. The single biggest inflation driver for us this year will be labor. Labor within manufacturing and labor within the broader logistics network. We’re also seeing some inflation like in resin, you’re pointing, that’s our single biggest kind of component that we’re purchasing. We are seeing that inflate and then fuel. So I think between those three pieces, you’re roughly getting to 3%. We believe we have cost productivity that more than offsets all of that. So specifically within kind of our cost of goods, we will be a net margin contributor because we — how that will play out.
In terms of the total gross sales cost save, I think it’s fair to say that roughly, call it $200 million, $250 million will be net cost saving between this supply chain cost productivity offsetting inflation, as well as all of the moves that we’re making below the line within managed expenses, whether it be people cost coming down or just broader purchase expenses coming down.
Megan Alexander: Great. And just to clarify that, that $200 million to $250 million is, that’s a net tail end verse ‘23 and that’s kind of should be independent of whether the top line’s kind of above or below or at the high end of the low end of your guide.
Gina Goetter: That’s right. Yes, that’s right.
Operator: Our next question is from the line of Andrew Uerkwitz with Jefferies.
Andrew Uerkwitz: Hey, thanks for taking my question. I guess I want to stick with Wizards of the Coast. If I think beyond 2024, what kind of cadence would we have in digital games? We saw two big games last year. No new ones this year as far as we know. Like what kind of cadence should we expect there on the digital game side? And any clue on the mix between mobile and traditional PC console?
Chris Cocks: Hey, Andrew. Yes, I would say for starting in 2026, we’ll probably have one major new digital game that we’ll publish. And then ‘27 to ‘30, it’ll be anywhere between one to two, depending on how the schedules kind of shake out. From a licensing perspective, I think you should generally see our licensing business after taking maybe a little bit of a step back this year, just given the Baldur’s Gate III launch bulge. Take a little bit of step back this year, but then it will grow sequentially every year as we just expand the number of licensors and games like Monopoly Go! continue to mature and become more profitable for us. We’re constantly adding new licensors to the mix, so it’s a little difficult to give you a lot of precise guidance about kind of like the mix between mobile or kind of like some of like the casino gambling that we that we also licensed to or PC and console.
But generally speaking, our license mix tends to be more mobile and casino gambling than it would be PC and console because that’s where we’re going to tend to focus our publishing efforts.
Andrew Uerkwitz: Got it. That’s very helpful. And then on the Universes Beyond sets coming beyond 2024. Is the goal there with Marvel and Final Fantasy to find new audiences to kind of better monetize your current audience or even maybe flip it around a bit? You’re great in competitive. I think you’re very good in kind of social gaming, but that collector spot of kids just buying cars for fun. Like where are you trying to really target with some of these Universes Beyond sets with Final Fantasy and Marvel?
Chris Cocks: Well, I think it’s generally speaking all the above. However, I think the special emphasis for Universes Beyond is new player growth. The Lord of the Rings was by far and away the most successful product at bringing in new players into the franchise that we’ve ever released. We would anticipate that would be the same or potentially even greater for IPs like Lord of the Rings or Marvel or some of the future things that we have in store. So, it’s a great way for us to kind of expand the base of users and grow kind of like future sets over time.
Operator: Our next question is from the line of Jaime Katz with Morningstar.
Jaime Katz: Thanks. I’d be interested to hear how you guys feel, you have completed the brand pruning process is that largely done, is it still underway, I’m just trying to think about what other headwinds we might have in the future.
Chris Cocks: I would say, good morning, Jaime, I would say it’s largely done. There might be one or two more and we would announce those deals within the next month or two. And then I would say moving forward, you should think about us as net brand creators.
Jaime Katz: That’s helpful.
Gina Goetter: Yes, my only add would — on the cleanup, I would say just kind of the same sentiment holds like we’re done with the cleanup. So as we head into ‘24, we’re rebuilding, we’re building now.
Jaime Katz: Okay. And then Gina, I don’t think it’s been delineated what portion of the cost savings are coming out of cost of goods sold relative to SG&A, my suspicion is most of it’s out of that SG&A line. But do you have that bifurcated and an easy way to digest? Thanks.
Gina Goetter: Yes, my very simple would say, yes, you’re right, it’s about half and half, if I’m looking at the big buckets. And then a little bit that we did in ‘23 on royalty expense, but it’s really small change compared to the cost savings we’re driving within supply chain and within the managed or operating census. So almost — it’s almost half and half.
Operator: Our next question is from the line of Jason Haas with Bank of America.
Jason Haas: Hey, good morning. Thanks for taking my questions. I’m curious if you could say what our POS was for you guys in 4Q? And then I’m also curious, it sounds like you’re expecting the industry could be down as much as 8% in 2024, but then expect it gets back to, I think you said low single digit growth thereafter. So I’m just curious to hear your thoughts on why you think the industry will be down so much and then what needs to change to get it back to growth.
