Magic Just Had Its First $600 Million Quarter. Hasbro Says the Next One Will Shrink.

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Welcome back to the MTG Sold podcast. Hasbara reported Q3 earnings on Tuesday.

And last week, I told you I'd be reading three things. Number one,

Wizard's Growth against the mid-single digit guide. Number two, inventory heading into Q4,

and number three, whether the full-year guide moved. Wizard's Growth 31%. The full-year guide

went from 5 to 7%, up to 7 to 9%. And Magic did 616 million. The first time it's ever passed

$600 million in a quarter. An inventory heading into Q4 turned out to be the whole call,

just not the way I expected. The first question came from Stephen Lashick at Goldman Sachs,

who asked, "What outperformed?" And Chris Cox said everything. Then, without anybody asking,

Cox added that Q4 Magic will probably be down, low to mid-single digits.

The reason is about 40 million of Reality Fracture. Gina Goader, the finance chief,

said in her prepared remarks that it was expected in Q4 and landed in Q3 instead.

Reality Fracture released October 2nd, and Hasbro's quarter ended September 27th.

Cox said that the supply chain was able to deliver a bit earlier, and the channel wanted it.

Then, James Hartiman at Citibank walked through all the moving pieces and said basically this is

what everyone is asking us about. And Cox said, "You totally captured it." And then this,

we managed to gain for the fans and not for quarterly results. That should be an expectation moving

forward. Management also said that they've been staring at the same math while prepping,

and knew it would be one of the top questions. So that line was ready to go.

The mechanism came out later when Garrick Johnson at Seaport asked about the lag between Hasbro

booking revenue and a hobby shop making the sale. The answer was that almost all of Magic goes

to your distributors and distributors take product anywhere from two to six weeks before release.

Hasbro books the revenue when the distributor takes it.

If you're releasing on October 2nd, the truck's leaving a week early or a week late,

decides which quarter you're in. Goater put it as, one week can make a difference,

a meaningful difference in the quarter.

There's a second shift too. The first, 2027 set, Noctis, the Sunken Realm,

launches in February. So its early shipments move out of Q4 and into Q1.

Cawks said without both shifts, Q4 Magic would have been up around 8-10%. Instead,

you get a big Q3, a modest decline in Q4, and in Cawks words, another big spike in Q1.

And Cawks was clear this is the plan moving forward. And I quote, we're chasing demand,

we're going to be opportunistic about when we supply. End quote, a down quarter,

Cawks said, and I quote, not a demand signal, that's just the timing of when we ship. End quote.

And I agree with that, a dip from early shipping doesn't tell you much about demand,

but the record doesn't either, and the record is what led the coverage.

My read is that Hasbro loaded the channel this quarter, and the call gives you the pieces.

Magic revenue, which is what Hasbro sold to distributors was up 34%.

When Johnson asked about retail sales, Hasbro said, "Point of sale for trading cards at the

retailers it tracks was up high single to low double digits." Those don't line up perfectly.

Tracked retail leans toward big box stores, and most magic sells through hobby shops,

and they didn't say what period they were comparing against. Still,

34% against high single digits is a wide gap. Then, the guidance. In July, Hasbro expected

the Wizards back half to grow low single digits. Now it's high single to low double.

That's more product out the door than they planned three months ago.

And some of it went into new stores.

Our pine, Coatrin at UBS, asked about distribution, and the answer was that the Wizards

Play Network stores are up about 38% since 2024, to more than 13,000, and mass retail doors are up

about 28%. Every new store needs opening stock before it sells a single pack.

That's real growth for Hasbro, and it gets booked the moment a distributor takes the product,

same as everything else. Nobody on the call asked how much magic is sitting with

distributors and stores right now. I would have liked that question.

TCG Player is one marketplace, so this is only a picture of one shelf.

On September 21st, 16 sellers have the reality fracture playboosters play listed there.

By October 19, it was 92, and the two week average sale price was down 12%.

The channel asked for those boxes early, and some of the channel is now trying to sell them.

Zianzu at BNP Parbus asked how Hasbro knows new players stick around.

Cox said the best proxy is backless sales, and that backlist is growing faster than new releases.

Cox also said a typical magic player is active for 5 to 7 years, takes a year or two off for

life stuff, and then comes back. Honestly, that sounds exactly right to me.

The trouble is the proxy. Backlist sales also go up every time Hasbro reprints an older set.

Gina Godor named the top backlist sellers by distribution as foundations, final fantasy,

and the 2023 Lord of the Rings set. And when Eric Handler at Roth asked for the split between

new releases, backlist, and secret layer, Godor said we typically don't provide those levels of splits.

So, the retention story might be completely true. The number offered as proof just goes up either way.

My favorite contradiction on the call was about the Hobbit.

Cox had told Laslick that a lean release like the Hobbit would normally sell about 50% less than a

full one, and that the Hobbit would do about as much over its life as a Lord of the Rings with far

fewer products. Then, Anthony Bonato at Wells Fargo, he asked about 27, and Cox said all six major

sets next year get the full line up. Every Commander deck, every collector product, because a full

suite can mean 50% more sales per set. That's something I think you need to factor in. So the Hobbit

proved a lighter second work, and 2027 goes heavier on every set anyway. With 2027, Magic Growth guided

to mid to high single digits. Those full line ups look like how Hasbro plans to get there.

Wizards Margin is close to 50% this year, and Godor guided it to the high 30s next year,

mostly because of the Exodus video game launching April 7th.

The next date on the schedule is Star Trek on November 13th. Count back two to six weeks,

and you get October 2nd through October 30th. So, by Hasbro's own shipping window, Star Trek's

launch shipments all land in Q4. Until then, keep an eye on how many sellers are listing what

reality fracture display. If you see the count still climbing when Star Trek arrives,

more of what shipped in September is still making its way to the shelf.

Thanks for listening, and I'll see you next Monday.

Full articles, graphs, and details on mtgsold.com.

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