Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Tony Gikas. You may ask your question and please state your company name.
Tony Gikas - Piper Jaffray
Good morning, guys, and great job on the quarter. A few questions; could you talk a little bit about the pricing improvement that you expect to experience in the second half of this year relative to the second half of last year? Do you see -- a second question -- consumer spending challenges in your international markets as significant as the consumer spending challenges you are seeing here in the U.S.? Third question, maybe just a little bit on Transformers, the next property coming. Could you give us a little idea of the growth that you might expect to see with your product line as that movie rolls out? And the fourth question, could you just give us a little update on your ad spending, how that’s trending on your Marvel intellectual property related products? Has it been trending above or below your expectations? And if you could give us a percent of sales, that would be great.
David D. R. Hargreaves
I’m going to take the first one in terms of pricing. As you know, we talked about this at our February analyst meeting, we were expecting significant increase, cost increases out of the China in particularly and we said at that time that firstly we were going to try and offset with cost-saving initiatives and product improvement initiatives, process improvement initiatives. But to the extent that we couldn’t do that, we would take some selective pricing and we did that certainly on new items when we came into the year. We priced them to be consistent with the latest commodity costs and we had some increases on carryover products.
Since that time, oil has continued to go up, as north of $130 a barrel, and what we anticipated in February of a 14% to 15% increase out of the orient has ended up being closer to the 17% to 18% range and in addition, obviously the costs of transportation out to the customers has gone up. So we are actually going in and we are taking a second round of pricing, which we really hadn’t envisaged in February, and basically that will be effective September the 1st. We already announced it to our customers. They obviously don’t like it but they recognize that their own costs are going up, their own label product and they’ve accepted it. So there will be sort of a mid-single-digit price increase effective September the 1st, in order to help us maintain our margins in light of rising costs.
- To read the full transcript on Seeking Alpha, click here »
