Editors note: This article confirms CPA’s recent research showing that businesses are accelerating their moves out of China, some are moving back to the US and that the US consumer is not being harmed.
Hasbro shifting its business out of China has been positive for the company, according to its CEO. “It’s gone very well for us,” Brian Goldner told CNBC on Tuesday.
[Jasmine Kim | August 27, 2019 | CNBC]
The toy company has been focused on diversifying its manufacturing operations since 2012 due to “enterprise risk reasons,” he said.
“We’re seeing great opportunities in Vietnam, India and other territories like Mexico. We’re doing even more in the U.S. We brought Play-Doh back to the U.S. last year, ” Goldner said on “Squawk on the Street. ”
As the U.S.-China trade dispute has intensified over the past month, President Donald Trump last week urged U.S. companies to leave China. He said in a tweet, “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
According to Hasbro, this isn’t hard to follow.
Goldner specified that the toy giant does not own any factories anywhere in the world. “In the U.S., we produce about 20% of our revenues for our U.S. business. Globally, it’s about two-thirds of our business coming out of China but that’s down substantially from nearly 90% in 2012.”
The CEO added: “We’re seeing an opportunity that will lead us, by the end of 2020, to be at about 50% or under for the U.S. market coming out of China. We believe by 2023, we should be under a third.”
Although Hasbro feels confident that it will be able to move most of its business out of China in the near future, it still expects to be hit with the 10% tariffs that Trump announced earlier this month but later delayed.
“I’m glad to see that the administration has put off putting tariffs on our category until later, closer to the holidays,” Goldner said.
When addressing the impact of duties on consumers, he said Hasbro will bear the costs. “We’re having conversations with our retailers and of course we will pass along those costs.”
The company hopes to “effectively pass on those costs” by mitigating the margin internally. But “ultimately, [they] will be borne by the consumer over time.”
Goldner said, “With time, you can redesign and redevelop your product lines with those tariffs in mind but in the short term, you do need to pass along those costs.”
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