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Hasbro Chairman and CEO Brian Goldner is closely watching the recent under-the-radar rise in oil prices and what it could mean to the cost of making toys. But at this point, Goldner isn’t baking in major price increases on Hasbro’s toys this year because of the advance in the commodity.
“We’re not really looking at substantial price increases on our products,” Goldner told Yahoo Finance Live. “We signed contracts with a lot of our third-party manufacturers for more than 12 to 18 months. So we might see oil prices creep up and then over a period of time behind that, resin prices might go [up]. But we haven’t seen major spikes yet.”
Oil is a key component in the resin used to make toys. And its climb higher this year (without much fanfare) amid hope for a strong global economic recovery after the pandemic has raised some concerns in the toy industry on the financial impact.
Brent crude oil prices have gained nearly 20% in 2021 as of Wednesday afternoon trading. At $60 a barrel, oil prices are at their highest level in more than a year.
Added Zahn, “When oil prices dropped a year or so ago there was a long term hope that they'd stay low enough to create some cost savings. The needle didn't move much either way. Retailers are placing holiday orders right now so MSRPs for those products are locked.”
So that’s the good news.
But what’s not a welcomed development — and which could ultimately trigger price increases on toys this year — are rising transportation costs as ports on the East and West Coasts have clogged because of the COVID-19 pandemic. It’s an issue — fueled by labor shortages and a crush of e-commerce demand — that companies from Hasbro to Peloton are dealing with at the moment, much to the detriment of margins.
“The bigger concern in terms of pricing right now is the cost of containers and shipping in general. There are still some jam ups that are rippling across the chain. I just got a note from a collectibles company that they upped a $39.95 figurine to $49.95 for that very reason,” Zahn said.
Hasbro’s Goldner acknowledges the transportation cost pressures, too.
“We are seeing a bit of pressure in domestic shipments — that’s something we think we can mitigate over time,” Goldner said.
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