The Toy Business Isn’t Fun Anymore
Following the Toys-R-Us bankruptcy last year, the retail industry eagerly cleared shelf space in preparation for a spillover of customers. It never came. Shelves remain stacked, perhaps the undoing of Toy-R-Us in the first place?
Amazon, Target, Walmart, and other retailers revised earnings guidance last year on hopes they might pick up the crumbs left behind by Toy-R-Us. Analysts are now blaming calendar technicalities and a briefer than usual holiday season for the slow demand, but in all likelihood, ‘mind share’ has more to do with it.
The much-loved Toys-R-Us brand was trusted, and its demise has left parents somewhat lost. It’s no secret that Amazon’s third-party sellers have mixed ratings when it comes to quality and safety standards, so Santa may have played it safe this year. More investors still are looking at the state of the wider sector.
According to data collected by Retail Dive, toy sales fell by approximately four-percent last year. Now, that may not sound like a lot, but it’s actually downward momentum twice as violent as the USA’s overall upward momentum, as measured by real gross domestic product (GDP) growth last year. What happened to playtime?
Well, younger and younger kids these days are swapping train sets for interactive tablets. It’s digital gizmos on the wish list, so selling old-school toys is basically hopeless without a license to manufacture based on Disney characters. Shares in Hasbro and Mattel have become more volatile in recent years as a result, the toy factories locked in a constant contest for rights and contracts.
All is not lost, however. Sentiment in the Invstr community suggests something of a sales renaissance for iconic brands on the horizon. Concerns over screen time could help flip fortunes and recover losses, but nobody’s going all in.
