CRWS Q4 2024: Plans 3 new LEGOLAND parks, including China expansion
- Manhattan Toy shows significant upside potential: The executives noted that while Manhattan Toy generated $18.5 million in fiscal 2024, they believe this was a trough and projected a long‐term target of $24 million in revenue, indicating potential for strong growth over the next 3 to 4 years.
- New retail placements are underway: Manhattan Toy secured placement at Walmart with shipments scheduled between the first and second quarter of fiscal 2025, offering broader exposure and future sales growth.
- Expansion of international business through LEGOLAND: The company is advancing a strategy to grow its playground business with the announcement of 3 new parks, including 2 in China—one of which will be the world’s largest—providing a catalyst for expanding international sales.
- Excess Inventory Concerns: Executives acknowledged that despite significant reductions, they "always have too much inventory," indicating persistent issues that could pressure margins and cash flow.
- High Operating Costs & Relocation Challenges: Questions about the steep California warehouse rents led to comments on the need for a long-term relocation solution, which is expected to take 18–24 months, potentially escalating costs and operational risks in the near term.
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Manhattan Projection
Q: What's fiscal 2025 Manhattan target?
A: Management reiterated the long‐term goal of reaching $24 million in Manhattan Toy sales, noting that this won’t occur in fiscal 2025 but is expected over the next 3–4 years. -
Margin Outlook
Q: Can gross margins reach 29–30%?
A: They see potential for reaching 29–30% gross margins in the long run; however, current pressures—especially higher warehouse rent—mean near-term margins will remain lower. -
LEGOLAND Expansion
Q: What about new LEGOLAND parks?
A: The LEGOLAND segment is performing well with plans for 3 new parks, including 2 in China opening in summer 2025, one of which will be the world’s largest. -
Warehouse Consolidation
Q: When will warehouse merging occur?
A: They are actively exploring consolidation via third‐party advice and expect to have a plan by the end of fiscal 2025, with any changes likely unfolding in fiscal 2026. -
Walmart Placement
Q: Is Manhattan entering Walmart?
A: Yes, Manhattan Toy has secured limited placement in Walmart, with shipments scheduled between the first and second quarters of fiscal 2025. -
Manhattan Sales Decline
Q: Why did Manhattan sales drop?
A: The decline was partly planned—affected by discontinued customers and adjustments to improve margins—despite lower top-line figures. -
Inventory Levels
Q: Are current inventory levels acceptable?
A: Management acknowledged ongoing excess inventory but noted significant improvements, although they still plan to further reduce it. -
Rent Solution
Q: How will high California rent be addressed?
A: They are working with a third party to secure a long-term, lower-cost facility, a process expected to take roughly 18–24 months. -
Minneapolis Lease
Q: What’s the outlook for the Minneapolis office lease?
A: The lease expires in early 2027 and, due to ample available office space downtown, subleasing is challenging—making this a longer-term issue. -
Buy Buy Baby
Q: Update on Buy Buy Baby expansion?
A: 11 stores have reopened and are being supplied, though further expansion has been slower than anticipated. -
Margin Timing
Q: Is the Q4 margin dip seasonal?
A: Yes, the Q4 dip is mainly seasonal, influenced by timing issues including reduced inventory orders around the Chinese New Year.