Molson Hart

My toy company's sales were up about 12.5% 2019 vs. 2018 but total profits fell 29% (after netting out distorting expenses and other income) - 40% of our catalog had declining profitability - 42% of our catalog had declining sales - 38% had declining total profits

After catching our inspection company engaging in some "funny business" we switched providers and increased what we spent on inspections by about 2.5x. We spent a lot more money on product testing as well. It's not what you spend, but the results. We're seeing results in 2020.

So why did this happen? - Intensifying competition, toughest we've ever seen. - Many many many product launches failed and we paid for it. - Costs rose and we weren't able to more than compensate for it with price increases

We need to work smarter. For many years, we were riding the Amazon wave. Now the tide is going out and we must change completely how we approach. There was a time when you literally could not launch a bad product on Amazon.

4-5 years ago we were profitably selling: - glassware - foam mats - metal springs - exercise equipment - wooden toys - clothing accessories Competition got tough so we focussed on our core competency. That's not enough now. First time our profits go down in company history!

One last comment that might be helpful to you stockpickers. I live, breathe, and eat this business. I didn't know and I'm still not even sure what happened. It's really hard to understand what's going on underneath the hood of a business.