WEBVTT - Whirlpool and Mattel CEOs Share Insights on the Consumer 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait Inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.440 gloom War, Business finance, and tech news. The Bloomberg Business 0:00:13.440 --> 0:00:19.600 Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:21.600 --> 0:00:24.639 Worldpool and on. I spent the last seventy five years 0:00:24.680 --> 0:00:27.840 becoming lawn v ex first. But now that make it 0:00:27.960 --> 0:00:35.600 easy for everybody, all. 0:00:35.520 --> 0:00:38.320 Right, who doesn't have a vintage commercial Whirlpool, of course, 0:00:38.440 --> 0:00:40.199 and they are front and center today we're watching the 0:00:40.200 --> 0:00:43.360 share price down about fourteen percent here. What we love 0:00:43.400 --> 0:00:45.879 about these kinds of companies is they can tell us 0:00:45.920 --> 0:00:48.680 so much about what's going on, certainly in the minds 0:00:48.720 --> 0:00:50.440 of the US consumer and what's going on in the 0:00:50.520 --> 0:00:54.200 US economy. And this is a great conversation, especially Tim, 0:00:54.240 --> 0:00:55.320 if you think about it. On a day where we 0:00:55.360 --> 0:00:57.440 got GDP, we expected it to be hot, and it 0:00:57.480 --> 0:00:58.760 came in even hotter than expected. 0:00:58.880 --> 0:01:01.600 In fact, Treasury Secretary Annie Yellen just in the last 0:01:01.640 --> 0:01:04.760 couple of hours telling Bloomberg exclusively that the surge that 0:01:04.760 --> 0:01:07.080 we're seeing in longer term body yields in recent months 0:01:07.280 --> 0:01:10.320 that's a reflection of the strong US economy not of 0:01:10.360 --> 0:01:13.120 a jump and government borrowing driven by that widening fiscal deficit. 0:01:13.160 --> 0:01:15.000 All right, so good to know. And that GDP report 0:01:15.040 --> 0:01:16.920 for the third quarter, it was fueled by surge and 0:01:16.959 --> 0:01:20.000 consumer spending. So let's get to our guests. We're Pull Corporation. 0:01:20.120 --> 0:01:23.920 Mark Bitzer, he is with us. He is chairman, he 0:01:24.040 --> 0:01:27.080 is president and CEO of Whirlpool, and he joins us 0:01:27.120 --> 0:01:31.000 on Zoom from Benton Harbor, Michigan. Mark, it is good 0:01:31.000 --> 0:01:34.319 to have you back with us. Your company. You came 0:01:34.360 --> 0:01:36.640 out and you trimmed your full year profit outlook, amen, 0:01:36.720 --> 0:01:39.880 and uptick in promotions. Investors noticed, and the stock is 0:01:39.920 --> 0:01:44.200 down the most and to the lowest since twenty twenty. 0:01:44.400 --> 0:01:48.240 So investors, definitely you are upset about what they heard 0:01:48.240 --> 0:01:48.560 from you. 0:01:48.600 --> 0:01:48.919 Guys. 0:01:49.280 --> 0:01:51.880 First of all, let's take the big picture. What's it 0:01:52.080 --> 0:01:54.240 like operating in today's environment right now? 0:01:55.560 --> 0:01:58.440 Yeah, First one, Carolyn, thanks for having me back on 0:01:58.560 --> 0:01:58.880 the show. 0:01:59.360 --> 0:02:02.320 I mean, what would be communicate today is a third 0:02:02.400 --> 0:02:05.320 quarter which I would still describe as pretty solid results. 0:02:05.320 --> 0:02:08.000 That we year the year we grew our business. 0:02:08.760 --> 0:02:11.160 We hadn't grown our business for six quarters in a row, 0:02:11.200 --> 0:02:13.480 and now we grew our business more than three percent 0:02:13.520 --> 0:02:17.200 revenue growth, we expanded market share, and year year we 0:02:17.320 --> 0:02:18.760 expanded our margin by about one. 0:02:18.760 --> 0:02:19.720 Hundred basis points. 0:02:20.840 --> 0:02:25.200 But yes, we trimmed our forecast technically not on the 0:02:25.360 --> 0:02:27.960 ongoing EPs because we also had some text benefits, but 0:02:28.040 --> 0:02:31.600 we as opposed to seven point seven and a quarter 0:02:31.720 --> 0:02:34.720 EBIT margin, we lowered it to six and a quarter 0:02:34.800 --> 0:02:37.120 to six and a half. So that is trimming the 0:02:37.160 --> 0:02:42.040 EBIT margin, and the market reacted. You could in many 0:02:42.040 --> 0:02:44.600 ways argue probably overacted, but it is what it is. 0:02:46.000 --> 0:02:48.280 But I think that's the essentially what happened. The underlying 0:02:48.400 --> 0:02:51.200 results which we had I would still consider very solid 0:02:51.240 --> 0:02:55.079 and particularly compared to the pre COVID levels and also 0:02:55.160 --> 0:02:57.960 compared to Q two where we essentially went sideways. But 0:02:58.400 --> 0:03:01.480 in all transparency, we expected our margins to continue to 0:03:01.520 --> 0:03:04.639 improve and instead of it by basic move sideways. And 0:03:05.120 --> 0:03:07.640 I think that's what we see today, a lot of 0:03:07.720 --> 0:03:09.160 reactions out there. 0:03:10.360 --> 0:03:11.120 Underneath that. 0:03:11.280 --> 0:03:14.040 That's probably getting to your broader question about the consumer. 0:03:14.840 --> 0:03:17.160 You know, the consumer right now in our industry, we 0:03:17.240 --> 0:03:21.800 see strong replacement demand. I even products breakdown and you 0:03:21.840 --> 0:03:25.600 have more applnes usage post COVID, but the discretionary side 0:03:25.600 --> 0:03:29.040 of a consumer, which is so much driven by consumer confidence. 0:03:29.320 --> 0:03:31.200 That is the soft part of a business. 0:03:31.760 --> 0:03:34.600 That is also the inherently more attractive part of a 0:03:34.639 --> 0:03:37.440 business because it comes with higher margin and higher mix. 0:03:37.880 --> 0:03:40.800 So we see right now a pretty heavy shift of 0:03:40.880 --> 0:03:44.320 consumer spending towards replacement side and lesser to a big 0:03:44.360 --> 0:03:45.440 discretionary purchase. 0:03:47.440 --> 0:03:49.600 That's interesting and that that makes sense given you know 0:03:49.640 --> 0:03:53.280 what else we're hearing with the economy mark. Where else 0:03:53.320 --> 0:03:56.080 are you seeing when it comes to the consumer in 0:03:56.120 --> 0:03:58.360 the US weakness when it comes to consumer spending? Is 0:03:58.400 --> 0:04:00.480 there certain categories that you can out line for us 0:04:00.480 --> 0:04:03.600 where you're seeing weakness? Are there geographies? Is it the 0:04:03.680 --> 0:04:06.920 higher end consumer that's that's actually struggling more than a 0:04:06.960 --> 0:04:09.080 consumer you know, the in the middle or lower end. 0:04:09.120 --> 0:04:11.520 Tell us, tell us what you're learning and what you're seeing. 0:04:12.440 --> 0:04:14.440 Yeah, and again it comes back to my early comment 0:04:14.480 --> 0:04:17.320 about replacement demand. You know a replacement demand just put 0:04:17.360 --> 0:04:20.480 yourself in consumer shoes. If you have a washer or 0:04:20.520 --> 0:04:22.520 refugeral breaking down, you want to have it replaced with 0:04:22.520 --> 0:04:26.240 two days. You don't do the big shopping around and 0:04:26.320 --> 0:04:29.520 the mixed up you want to replace. So that is 0:04:29.720 --> 0:04:32.520 just a one on one sale, which again is typically 0:04:32.600 --> 0:04:37.320 not a very mix or margin tractive business. The discretionary side, 0:04:37.320 --> 0:04:40.239 where people plan for a new kitchen or remodel house, 0:04:40.480 --> 0:04:43.400 is the soft part right now, and that's the much 0:04:43.560 --> 0:04:46.960 richer part of that. So in general terms, you could say, yeah, 0:04:47.000 --> 0:04:49.400 there's a little bit of a trading down on a 0:04:49.440 --> 0:04:54.280 consumer landscape. There's a segment of call it a premium consumer, 0:04:54.320 --> 0:04:57.480 which is pretty resilient, but it's kind of a big 0:04:57.520 --> 0:04:59.920 mass in between where you just don't see trading up 0:05:00.080 --> 0:05:02.000 if at all. Right now, you just see more trading 0:05:02.040 --> 0:05:06.040 down coupled with you know, a promotion environment which we 0:05:06.360 --> 0:05:09.160 described as return back to pre COVID levels. 0:05:11.520 --> 0:05:14.960 Well, as a consumer, I'm saying, yay promotions, Mark, I'm 0:05:14.960 --> 0:05:17.000 going to be quite honest with you, but it does 0:05:17.040 --> 0:05:19.159 say something to kind of move the needle right to 0:05:19.200 --> 0:05:23.520 get consumers kind of off the thinking area into the 0:05:23.560 --> 0:05:28.120 actual you know, buying of something. So how aggressive are 0:05:28.160 --> 0:05:31.760 your promotions and are you anticipating that in terms of 0:05:31.800 --> 0:05:34.680 maybe some weakness and the need for promotions that this 0:05:34.760 --> 0:05:37.279 continues into well into twenty twenty four. 0:05:39.080 --> 0:05:42.240 Yeah, and in rones called today, what we refer to 0:05:42.320 --> 0:05:45.880 is we consider a promotion environment as having normalized, ie 0:05:46.400 --> 0:05:49.839 call it past tense, which AWS implies we expected stabilized 0:05:49.880 --> 0:05:54.520 going forward. So in terms of the depth of duration 0:05:54.560 --> 0:05:57.440 of promotion, this is not any different from pre COVID, 0:05:57.600 --> 0:06:01.760 and frankly it is something which we expected, but it 0:06:01.880 --> 0:06:04.720 happened and occurred maybe one or two quarters early when 0:06:04.760 --> 0:06:08.200 we originally anticipated. And that again comes fully back to 0:06:08.240 --> 0:06:12.719 the discretionary side of a demand, post mortgage rate increases, 0:06:12.920 --> 0:06:17.440 post all these horrible world news messages that tumbled pretty 0:06:17.520 --> 0:06:21.240 much call it in Q two, and consumer confidence ultimately 0:06:21.400 --> 0:06:24.360 drove that lower discretion of demand, which in turn drove 0:06:24.400 --> 0:06:26.360 a higher promotional intensity and the environment. 0:06:28.880 --> 0:06:31.039 What about the other part of your business, the part 0:06:31.040 --> 0:06:36.280 about workers attracting and retaining talent costs that you have 0:06:36.680 --> 0:06:41.400 in terms of buying the equipment necessary to build these machines. 0:06:41.400 --> 0:06:44.240 How are wages for whirldpool workers right now? Are they 0:06:44.279 --> 0:06:45.000 up yere over year? 0:06:46.240 --> 0:06:47.800 Yeah, So, first of all, to put it in a 0:06:47.800 --> 0:06:50.839 broader context, as you know, over the last three years, 0:06:50.920 --> 0:06:52.760 we were not only concerned about cost, we were also 0:06:52.839 --> 0:06:55.360 concerned about resilience and the strength of our supply chain. 0:06:56.320 --> 0:06:58.960 The latter part we basically have I would say pretty 0:06:59.000 --> 0:06:59.760 much fully resolved. 0:06:59.800 --> 0:07:01.200 Our supply chain is intact. 0:07:01.680 --> 0:07:04.840 We don't have major availability issues, so that make a 0:07:04.920 --> 0:07:07.840 check mark behind it. On the cost side, over the 0:07:07.920 --> 0:07:10.160 last couple of years, we saw the biggest increase of 0:07:10.280 --> 0:07:15.440 cost on basically raw material and transport. Transport has come 0:07:15.480 --> 0:07:18.200 down quite a bit, and raw materials are starting to 0:07:18.280 --> 0:07:20.680 trend down and that is a favorable trend which we 0:07:20.760 --> 0:07:23.480 observe particular second half of this year, and we also 0:07:23.520 --> 0:07:27.400 expect into next year well wage side, and again that 0:07:27.600 --> 0:07:31.560 is more driven by of our US factories. One is unionized, 0:07:31.800 --> 0:07:36.240 once are non unionized. We basically have every year wage adjustment, 0:07:36.280 --> 0:07:40.360 and we in phase of a labor shortage, particular in 0:07:40.440 --> 0:07:43.920 twenty one and twenty two, we did already fairly significant 0:07:43.920 --> 0:07:45.720 moves on that wage side. 0:07:45.760 --> 0:07:47.160 So so I would. 0:07:46.920 --> 0:07:49.720 Say this year we're not confronted with a massive wage increase. 0:07:49.800 --> 0:07:53.440 We still of course do year the year increases and 0:07:53.520 --> 0:07:55.960 that kind of helps us dealing with a labor shortage. 0:07:55.960 --> 0:07:58.600 And right now I would say across the board, maybe 0:07:58.600 --> 0:08:01.840 with some fewer regions option, we're pretty well staffed and 0:08:02.320 --> 0:08:05.120 beliebor shortage is it's a lot less of initiate than 0:08:05.120 --> 0:08:06.760 in most for example two years ago. 0:08:08.520 --> 0:08:10.440 Hey, Mark, so what do you make of when we 0:08:10.480 --> 0:08:12.840 get the like the retail sales numbers that come out 0:08:12.880 --> 0:08:15.440 and it shows a really strong consumer and which kind 0:08:15.440 --> 0:08:18.960 of surprises everybody because we keep talking about student loan 0:08:19.040 --> 0:08:22.080 payments or car payments that are going to slow down 0:08:22.280 --> 0:08:25.880 the consumer. I see what you said about replacement versus discretionary. 0:08:26.080 --> 0:08:29.440 But do you does that retail sales data sometimes surprise you? 0:08:29.960 --> 0:08:33.040 Do you when people say resilient consumer, does it kind 0:08:33.040 --> 0:08:35.400 of just say, well, resilient but maybe. 0:08:35.200 --> 0:08:35.800 Not so much. 0:08:37.120 --> 0:08:37.920 Yeah, I'm in Carol. 0:08:37.960 --> 0:08:40.480 I mean I would say, I think you need to 0:08:40.520 --> 0:08:44.880 move from a headline into the details. And yeah, with 0:08:45.000 --> 0:08:47.800 consumer spending, and that's that's confirmed. The question is on 0:08:47.840 --> 0:08:50.120 what is for consumer spending? And we saw there's a 0:08:50.160 --> 0:08:54.440 lot of spending on services. Restaurant calls have gone up, 0:08:54.520 --> 0:08:58.160 travelers gone up quite a bit. Our part of a 0:08:58.240 --> 0:09:01.800 business consumer durable. And again I'm talking of a discretionary side, 0:09:01.880 --> 0:09:05.840 not a replacement site. For most families, buying a washing 0:09:05.880 --> 0:09:08.480 machine or remodeling kitchen is a very significant part of 0:09:08.559 --> 0:09:12.080 a disposable income. You only do this expenditure if you 0:09:12.120 --> 0:09:15.720 have confidence in your economic future and the broader environment 0:09:16.280 --> 0:09:19.120 and consumer confidence. And you can look at whatever index 0:09:19.320 --> 0:09:21.880 that is one which kind of call it. April may 0:09:22.000 --> 0:09:26.680 dropped off pretty sharply. So yes, I do cbover consumer spending. 0:09:27.320 --> 0:09:30.280 I think more durable categories is a slightly different picture. 0:09:31.000 --> 0:09:34.280 They're just on the long term big disposable items or 0:09:34.280 --> 0:09:37.959 big ticket items. There's some reluctance of the discretionary side. Again, 0:09:38.040 --> 0:09:40.600 replacement site is very solid, but on a discretionary side 0:09:40.640 --> 0:09:41.040 is soft. 0:09:43.480 --> 0:09:46.480 Do you guys talk a lot about a recession coming? 0:09:47.000 --> 0:09:50.360 You know, it's been coming for two years, and some 0:09:50.400 --> 0:09:52.520 would say, listen, we've already had you know, certain parts 0:09:52.520 --> 0:09:54.240 of the market have seen you know, or certain parts 0:09:54.240 --> 0:09:57.640 of our economy have seen it. But what's your best 0:09:57.679 --> 0:09:59.840 guess as someone who runs a company, you've seen some 0:10:00.040 --> 0:10:02.199 any different. You know, we've gone through a very tough 0:10:02.240 --> 0:10:04.880 market cycle, certainly coming off the pandemic that was bad, 0:10:04.920 --> 0:10:07.240 and then it was actually pretty good. People were doing things, 0:10:07.280 --> 0:10:10.600 especially on their homes. So do you think a recession 0:10:10.880 --> 0:10:13.319 is likely in the United States? Your biggest market here 0:10:13.559 --> 0:10:14.440 certainly by revenue. 0:10:14.480 --> 0:10:16.880 Yeah, First of all, I would start with a cabin 0:10:16.960 --> 0:10:19.800 there's probably a lot more people more confident. 0:10:19.400 --> 0:10:20.640 About that subject than I am. 0:10:20.880 --> 0:10:25.280 So it's the way I would look at it. Our company, 0:10:25.320 --> 0:10:28.160 in many ways is a cannery in the coal minor. 0:10:28.200 --> 0:10:30.240 We see certain trends earlier. What I mean with that, 0:10:31.160 --> 0:10:34.680 we saw the cost inflation in our business a lot 0:10:34.760 --> 0:10:38.720 earlier than most companies saw it. The same time, we 0:10:38.760 --> 0:10:41.400 saw the beginning for cost inflation a little bit earlier. 0:10:41.480 --> 0:10:44.199 And we probably also see the kind of a normalized 0:10:44.200 --> 0:10:47.840 consumer promotion environment that livered early. So most of the 0:10:47.880 --> 0:10:50.480 broad economy sees we tend to see maybe call it 0:10:50.520 --> 0:10:54.320 three to six months earlier that in mind, you know, 0:10:54.360 --> 0:10:57.720 it's kind of I think broader terms, the US economy 0:10:57.800 --> 0:11:02.840 is more resilient than most people thought. So from that perspective, 0:11:03.120 --> 0:11:06.720 I personally do not see a scenario for a deep recession. 0:11:07.080 --> 0:11:08.439 Cooper be something shallow. 0:11:08.800 --> 0:11:12.199 Yes, I think the key element will be going forward 0:11:12.240 --> 0:11:15.200 to is you know, when when will the Feds signal 0:11:15.280 --> 0:11:19.360 a kind of a stabilization of a plateau of interest rates? 0:11:20.080 --> 0:11:21.080 That is a big element. 0:11:21.160 --> 0:11:23.640 And then of course what is a little bit more 0:11:23.640 --> 0:11:27.280 difficult to answer, when do you when do always horrible 0:11:27.320 --> 0:11:32.120 world news become a little bit more less or or 0:11:32.120 --> 0:11:35.040 are we getting numb against it. So that's for consumer 0:11:35.080 --> 0:11:37.679 confidence part of it. But again from a person perspective, 0:11:38.480 --> 0:11:41.160 we don't expect a big boom, but we don't expect 0:11:41.240 --> 0:11:46.200 the scenario for deep recession. We're prepared to very small, 0:11:46.360 --> 0:11:49.280 modest growth in our industry, but were also prepared to 0:11:49.320 --> 0:11:50.560 deal with a shallow recession. 0:11:53.160 --> 0:11:56.400 Mark on that subject of everything that's happening around the world, 0:11:56.520 --> 0:12:00.600 are focused certainly not numb. Yeah, and our boocus certainly 0:12:00.640 --> 0:12:02.200 on the Middle East in addition to other parts of 0:12:02.200 --> 0:12:04.200 the world. But there's also the business side of this, 0:12:04.280 --> 0:12:07.040 which is oil prices. And I'm wondering how you're watching 0:12:07.120 --> 0:12:09.680 energy markets, how you're watching oil prices, and if we 0:12:09.679 --> 0:12:11.560 do see a spike in oil prices, what that does 0:12:11.600 --> 0:12:12.400 to your business? 0:12:14.320 --> 0:12:18.640 Yeah, And then and let me be maybe a radio 0:12:18.640 --> 0:12:20.880 cause maybe not a perfect form to comment on this 0:12:21.160 --> 0:12:24.920 horrific attax and the subjequent subsequent human tragedy coming out 0:12:24.920 --> 0:12:27.360 of this one. So it's kind of difficult to move 0:12:27.360 --> 0:12:31.839 from mad to economic impact. Having said that, of course, 0:12:31.880 --> 0:12:35.680 there's you know, the entire Middle East situation, if it 0:12:35.760 --> 0:12:39.080 would further escalate, has some risk on the oil prices. Again, 0:12:39.080 --> 0:12:42.080 there's a big if if it further escalates in an 0:12:42.160 --> 0:12:45.719 uncontrolled manner. As you've seen the last two days the 0:12:45.800 --> 0:12:48.240 oil price from initial spike, they came down a little 0:12:48.240 --> 0:12:53.200 bit and and right now in our internal forecast, but 0:12:53.240 --> 0:12:56.040 again there's people who probably know a lot more about it. 0:12:56.559 --> 0:12:59.640 We expect also stabilization sideway to move off the oil, 0:12:59.679 --> 0:13:05.079 but it's a lot depends on will there be stability 0:13:05.360 --> 0:13:08.880 in what is an extremely difficult Middle East environment. 0:13:11.559 --> 0:13:14.800 No, absolutely, Mark, We so appreciate your time. You've always 0:13:14.800 --> 0:13:18.440 been so generous, especially throughout the pandemic coming off of it, 0:13:18.520 --> 0:13:20.440 trying to help make sense of that cycle. And we 0:13:20.480 --> 0:13:23.360 really appreciate your time trying to understand what's going on 0:13:23.559 --> 0:13:26.839 and really appreciate it. Mark Bitzer. He is chairman, president 0:13:26.920 --> 0:13:31.080 and CEO of Whirlpool, joining us on Zoom from Benton Harbor, Michigan. 0:13:31.160 --> 0:13:33.840 A great gauge on what's going on in the economy 0:13:33.840 --> 0:13:36.679 at a time when there is so much heavy news, 0:13:36.720 --> 0:13:40.400 so much uncertainty. Really appreciate what's more to come. Right 0:13:40.440 --> 0:13:40.760 here on. 0:13:40.800 --> 0:13:46.160 BusinessWeek, you're listening to the Bloomberg Business Week podcast. Catch 0:13:46.240 --> 0:13:49.600 us live weekday afternoons from three to six Eastern Listen 0:13:49.640 --> 0:13:53.120 on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg 0:13:53.160 --> 0:13:55.840 Business App, or watch us live on YouTube. 0:13:57.280 --> 0:14:00.520 As promised, we do have the Mattel's CEO on christ 0:14:00.600 --> 0:14:03.480 joining us from Elsagundo, California on Zoom. 0:14:03.679 --> 0:14:06.040 Hi Carolim, it's great to be with you. 0:14:06.520 --> 0:14:08.400 It's so great to be with you. I feel like 0:14:08.440 --> 0:14:10.360 I have a million questions. I feel like I want 0:14:10.360 --> 0:14:11.640 to go to a bar, have a drink with you 0:14:11.720 --> 0:14:14.320 and just sit and talk. I want to start with 0:14:14.360 --> 0:14:19.920 the Israel Hamas conflict. You're born in Israel, studied at 0:14:19.960 --> 0:14:23.040 Tel Aviv University before heading to the West coast of 0:14:23.080 --> 0:14:26.560 the United States of America. I hope your family and 0:14:26.640 --> 0:14:30.280 friends are safe. I pray that they are safe. How 0:14:30.280 --> 0:14:31.960 are you thinking about all of this right now and 0:14:32.040 --> 0:14:34.880 this conflict and is there a way to peace in 0:14:34.920 --> 0:14:35.480 that region? 0:14:36.600 --> 0:14:41.680 Yeah, thank you for asking my family. My family is okay, 0:14:42.200 --> 0:14:45.320 My immediate family is okay. But and you know, of course, 0:14:45.560 --> 0:14:48.920 in Israelia, this is very personal to me. And I 0:14:48.960 --> 0:14:52.280 know too many people who lost loved ones or have 0:14:52.640 --> 0:14:55.600 relatives that have been kidnapped and are now being held 0:14:55.760 --> 0:15:00.360 hostage in Gaza. You know, on behalf of Mattel. We 0:15:00.520 --> 0:15:05.600 condemned the terrorism and atrocities perpetrated by Hamas and stand 0:15:05.640 --> 0:15:10.040 against hate and violence in all forms. We express hope 0:15:10.520 --> 0:15:13.960 for the safety of Israelis and Palestine and children and 0:15:14.000 --> 0:15:19.120 families part in the Israeli Hamas war. As a company. 0:15:19.200 --> 0:15:23.400 Since the Hamas attacks on October seventh, the Mattel Children's 0:15:23.400 --> 0:15:27.640 Foundation has been focused on humanitarian work, including cash and 0:15:27.720 --> 0:15:32.840 toy donations with shelters and hospitals who support children who 0:15:32.840 --> 0:15:36.520 are suffering. And we're sitting here all wishing for a 0:15:36.600 --> 0:15:40.960 swift resolution to the war and more peaceful times in 0:15:41.000 --> 0:15:41.520 the future. 0:15:43.920 --> 0:15:46.640 Well you know, and it's something that you know, people 0:15:46.680 --> 0:15:50.560 who are wow, gosh, I mean up to eighty years 0:15:50.560 --> 0:15:52.720 old at this point have dealt with their entire lives 0:15:52.840 --> 0:15:56.800 in that area of the world. And I'm wondering to you, 0:15:56.840 --> 0:15:59.120 and not speaking on behalf of Mattel, but just getting 0:15:59.120 --> 0:16:02.160 your thoughts personally, how this ends. If a two state 0:16:02.200 --> 0:16:04.440 outcome is the only solution to ending the conflict there 0:16:04.480 --> 0:16:05.120 once and for all. 0:16:07.080 --> 0:16:13.480 You know, it's a complicated conflict, and were now sitting 0:16:13.560 --> 0:16:17.560 at a time that is very volatile. We see risk 0:16:18.200 --> 0:16:22.360 of escalation, and we just hope for a swift, swift 0:16:22.400 --> 0:16:27.440 resolution and wishing peace for everybody as soon as we can. 0:16:29.360 --> 0:16:31.080 I want to talk about Mattel. I have one more 0:16:31.160 --> 0:16:33.800 questions for you. Do you think Prime Minister Benjamin Netanyah 0:16:33.880 --> 0:16:36.800 who is not going to be the leader that brings 0:16:36.880 --> 0:16:37.560 lasting peace. 0:16:39.520 --> 0:16:42.760 And this is not the time to get into the 0:16:42.800 --> 0:16:47.720 political discussion right now. Everyone is focused on resolving the situation. 0:16:49.000 --> 0:16:55.520 Israel articulated its priorities. We're all really looking forward for 0:16:55.600 --> 0:17:00.600 the release of the hostages. There are thirty run under 0:17:00.600 --> 0:17:03.520 the edge of sixteen that are being held at captive 0:17:03.600 --> 0:17:07.879 right now, about half the hostages of women, and we 0:17:08.040 --> 0:17:10.000 really believe that this should be a resolved as soon 0:17:10.040 --> 0:17:13.600 as possible, and we pray for the release, safety and 0:17:13.640 --> 0:17:18.480 release of all the hostages that are now being held captives. 0:17:20.600 --> 0:17:23.560 You are absolutely right, but we do appreciate you weighing 0:17:23.600 --> 0:17:25.520 in on this because we have talked to you about 0:17:25.680 --> 0:17:29.639 serious issues in the past, so really appreciate this. No 0:17:29.720 --> 0:17:31.760 easy segue, but I do want to talk about the 0:17:31.760 --> 0:17:36.080 business of Mattel. Talked to us about last quarter and 0:17:36.119 --> 0:17:39.720 the outlook. It was a tough day in the equity 0:17:39.720 --> 0:17:44.000 market for you guys. You did talk about tougher industry conditions. 0:17:44.040 --> 0:17:46.920 What are those tougher industry conditions that you guys are 0:17:46.920 --> 0:17:47.880 worried about. 0:17:49.880 --> 0:17:54.520 What they see the industry being soft in the third 0:17:54.600 --> 0:17:56.879 quarter and near to date, and as a result, we 0:17:57.800 --> 0:18:01.440 adjusted our expectations and expect and believe the industry will 0:18:01.480 --> 0:18:05.240 decline mixing a digit for the full year. But don't 0:18:05.760 --> 0:18:09.280 you need to remember that this is after the industry 0:18:09.720 --> 0:18:13.960 was up twenty two percent from twenty nineteen to twenty 0:18:14.000 --> 0:18:18.240 twenty two, reaching an all time high. So coming off 0:18:18.480 --> 0:18:24.160 after such a strong increase, especially in a challenging microeconomic environment, 0:18:25.280 --> 0:18:29.240 we believe that this is a reasonable situation and doesn't 0:18:29.960 --> 0:18:33.960 reflect on the strength and resilience of the industry long term. 0:18:34.000 --> 0:18:36.920 The toy industry has been growing for over ten years 0:18:37.240 --> 0:18:40.040 and it's a growth category, So we feel very good 0:18:40.080 --> 0:18:43.840 about the industry and it's a growth process. And even 0:18:43.920 --> 0:18:49.280 in that environment, even in a softer market, Matsel performed 0:18:49.359 --> 0:18:56.639 very strongly. Our quarter exceeded, our quarterly result exceeded expectations. 0:18:56.680 --> 0:19:01.560 We showed meaningful sales groat margin with very strong free 0:19:01.600 --> 0:19:06.760 cash flow. Intercourse, we saw consumer dement increasing and we 0:19:06.880 --> 0:19:08.320 continue to outfreitz the industry. 0:19:10.240 --> 0:19:12.440 I think a lot of investors today, at least sending 0:19:12.480 --> 0:19:16.200 shares down about seven percent, were concerned that you guys 0:19:16.280 --> 0:19:19.159 maintained your full year sales outlook despite all of the 0:19:19.200 --> 0:19:22.760 success of the Barbie movie. So what would have to 0:19:22.800 --> 0:19:25.320 happen Eon to bring in more than the one hundred 0:19:25.320 --> 0:19:28.000 and twenty five million dollars expected from the Barbie movie 0:19:28.240 --> 0:19:30.760 and related products? What needs to happen at MATEL or 0:19:30.800 --> 0:19:32.919 in the industry for that to happen or for the consumer. 0:19:33.000 --> 0:19:38.560 I should say, while we maintained the top line expectations, 0:19:39.080 --> 0:19:43.600 we increase our outpook for a ghost margin for our 0:19:43.680 --> 0:19:47.240 EPs and EBIDA, and still expect a very strong free 0:19:47.320 --> 0:19:49.280 cash flows to float through. 0:19:50.359 --> 0:19:53.240 What they change is that relative to our initial expectation 0:19:53.359 --> 0:19:55.760 at the start of the year is that the industry 0:19:55.800 --> 0:19:59.520 is we believe will now decline amidst of the digit 0:20:00.080 --> 0:20:04.400 but the fundamentals are strong. We do expect an accelerated 0:20:04.440 --> 0:20:08.639 growth rate in the fourth quarter and significant expansion and 0:20:08.680 --> 0:20:11.919 growth margin compared to the prior year, and for consumer 0:20:12.000 --> 0:20:17.040 demand to be positive for Mattel in the holiday season, 0:20:17.520 --> 0:20:21.200 in the fourth quarter and the full year. So we 0:20:21.600 --> 0:20:25.720 are performing strongly. We're heading into the fourth quarter, seeing 0:20:26.680 --> 0:20:31.520 stronger support from retailer, more shelf space, more representation in 0:20:31.720 --> 0:20:37.480 major holiday catalogs, and overall a strong position with a 0:20:37.680 --> 0:20:42.280 very broad based offering, a product across a play patterns, 0:20:42.359 --> 0:20:46.080 crash points, and we believe we have very well positioned competitives. 0:20:48.440 --> 0:20:51.320 So just to follow up there, the one hundred and 0:20:51.320 --> 0:20:54.280 twenty five million that you put out there, the estimate 0:20:54.520 --> 0:20:57.800 from the Barbie movie and related products, would you say 0:20:57.800 --> 0:20:59.280 it might be even conservative a little bit? 0:20:59.359 --> 0:21:04.000 You know, well, we did say it's at least one 0:21:04.080 --> 0:21:07.760 hundred and twenty five million dollars revenue at sixty percent 0:21:08.160 --> 0:21:09.439 operating income margin. 0:21:10.680 --> 0:21:10.960 But the. 0:21:12.680 --> 0:21:16.760 Takeaway from this is that this is one movie in 0:21:16.920 --> 0:21:21.240 one year, and as we continue to scale our strategy 0:21:21.600 --> 0:21:26.040 and have more movies, more executions, and not just in film, 0:21:26.080 --> 0:21:30.520 but also in television, in location based entertainment, theme parks, 0:21:30.600 --> 0:21:36.280 consumer products, digital experiences, music, and other verticals in some 0:21:36.440 --> 0:21:40.080 cases that are actually bigger than the toy industry, we 0:21:40.240 --> 0:21:44.639 believe that we have an opportunity to capture significant value 0:21:44.680 --> 0:21:48.080 from our franchises. And we're not saying that everything let's 0:21:48.119 --> 0:21:51.720 go there as successful as Barbie, but we absolutely believe 0:21:51.760 --> 0:21:55.520 that in the aggregate there's a meaningful opportunity for us. 0:21:57.200 --> 0:21:59.159 Well, let's go there. And I've got to say, you know, 0:21:59.200 --> 0:22:00.920 I remember when we start talking to you or you 0:22:01.040 --> 0:22:03.240 was it the early days of the Barbie Movie or 0:22:03.280 --> 0:22:05.000 you started filming. So it was kind of fun to 0:22:05.080 --> 0:22:07.000 be along for that process. But it was a movie 0:22:07.040 --> 0:22:08.920 that made us laugh, made us cry, and like I said, 0:22:08.960 --> 0:22:11.920 it appealed to a lot of different ages, which was 0:22:11.960 --> 0:22:15.480 pretty pretty wild. So what are the key brands that 0:22:15.640 --> 0:22:19.760 you think have life beyond a kid's toy chest and 0:22:19.840 --> 0:22:22.879 that you think we should be all kind of waiting for. 0:22:23.080 --> 0:22:24.920 I don't know whether it's six months, twelve months, the 0:22:25.000 --> 0:22:26.520