Tom Keoughan Archives

Toyjobs Logs Best Month Ever

In April, Toyjobs has logged its best month ever and we still have ten days left. In the toy business, a lot of searches are started early in the year but companies have difficulty arranging interview times and moving the ball forward in January and February due to all of the trade shows. Lots of jobs end up getting filled in March and April. That’s what we have seen in each of the last two years.

Search starts are continuing at a rapid pace. Toy sales were up approximately 6.5% last year. That makes companies happy and happy companies are hiring! Let’s hope it continues. Lots of hiring is good for everyone.

I’m sorry this is so brief but I gotta get back to work.

All the best,
Tom Keoughan

By ToyJobs|2016-04-20T09:40:19-05:00April 20th, 2016|ToyJobs Blog|Comments Off

Toyjobs Prevails in Personal Fraud Suit vs. Ivars Sondors

The Superior Court of New Jersey has awarded Toyjobs a default judgment in the amount of $39,456.00 in its personal fraud suit against former A-HA Toys president Ivars Sondors.

Toyjobs president Tom Keoughan said: “I certainly expect that Mr. Sondors will try to make it difficult to collect but we have chased him for over three years across two continents. He should realize by now that we’re not going away. The beautiful thing about a judgment obtained on a Complaint for fraud is that it can’t be cleared through bankruptcy. It sticks around and so shall we.”

By ToyJobs|2020-11-20T08:51:01-06:00December 7th, 2011|ToyJobs Blog|Comments Off

Feeling Better but Proceeding With Caution

The stock market has been racing ahead even as progress in the real economy has been much more muted. The market, after all, runs on emotion in the short run and tends to look about six months ahead. I’m as glad as anyone to see it go up but have the feeling that this is really just a rebalancing after having overshot to the downside. In these financially perilous times it is prudent to rein in one’s “irrational exuberance”.

Meanwhile, back in the real economy, green shoots are heavily mixed with weeds. The consumer, who represents 70% of the U.S. economy, is broke. Housing prices continue to decline, although at a more gradual pace. People can no longer use their homes as ATM machines. Their 401Ks are down thirty to forty percent. They have little or no savings and credit card limits are being cut. At the same time, people are worried about their jobs. The unemployment rate fell in July, dropping 0.1 percentage points to 9.4 percent. That still leaves us with U6 (a better picture of unemployment and underemployment) of 16.3 percent. That means that one in nine Americans is unemployed, underemployed or for the time being has just given up looking for a job. Another underpublicized number is that about a quarter of the improvement in job losses in July was due to government hiring. In the private sector, companies are simply cutting heads more slowly. Although the worst appears to be over that doesn’t mean that anything is getting better quickly.

With the consumer being so weak it should be no surprise that retail sales have continued to slide. What about cash for clunkers you ask? First of all, at best this is a one time boost. It also represents a little sleight of hand for the government’s consumer spending numbers. For example, I traded in a twenty year old Jeep that we only used off road and in the snow. It could barely reach 50 mph and the floorboards were beginning to “Flintstone”. I couldn’t have gotten a hundred dollars for that car. I traded it in for a Subaru Outback. Obama paid the $4,500 down payment and I got 0.0 percent financing over five years. Strangely the entire $24,000 cost of the car will be counted in the government’s August consumer spending numbers. Wow. I guess we should look for an artificial bump in consumer spending for August and September.

We should also consider a number of other problems which will loom large in the not too distant future. One in eight U.S. households with mortgages is either in foreclosure or in arrears. And there are even more mortgage resets coming in the next fifteen months than have happened to date. Add to that mounting credit card losses and the coming commercial real estate debacle and it’s easy to see that we still have a long bumpy road ahead of us.

Despite all that, I am not a gloomster. I would characterize myself as cautiously optimistic but a believer that things are going to take another year before they really get better. Of course, I have no way of knowing that for sure. Nobody does. I can’t tell the future and neither can any of the talking heads you see on television. What we do know is that someday somewhere in the future things will be better even if we don’t know when that will be. What businesses and households can do is to look at the possible scenarios and budget in such a way that it is most likely that they will survive until better times are realized.

The different types of recovery that we are likely to see are: L, W, U or soup bowl, square root or V. The L shaped scenario has only been seen once in U.S. history. It is an extreme and if it happens again we won’t be worried about our budgets, we’ll be foraging for canned goods and bullets. The government led by Ben “I’ll throw money from helicopters” Bernanke have promised to do everything in their power to avoid that grim future. If it happens, there is little we can do about it outside of stockpiling krugerrands and Campbell’s soup. So, let’s not even worry about that.

The W, U and square root models of recovery are the most likely scenarios while a V shaped one is unlikely for all of the reasons stated above. Let’s start with the U shaped recovery (which I think is most likely, although that means very little). In a U shaped recovery, after the roller coaster ride to the bottom that we saw in October 2008 and again in March of this year, there is a longer than usual period of no or slow growth before the economy begins to pick up again. In this type of scenario businesses and households should budget very cautiously although not to the point of complete austerity.

With a W shaped recovery we would see a sharp upswing only to come crashing down again later before a real sustained recovery begins. It’s important not to fall for a head fake like we could be currently seeing in the stock market but are yet to see in the actual economic data. By budgeting for a U shaped recovery we are covering ourselves in case it really turns out to be a W and in fact can use the brief spike in the W to replenish cash reserves.

With a “square root” recovery, we again take that roller coaster ride to the bottom followed by more gradual growth rate. Growth won’t be as rapid as a V shaped recovery but will begin far sooner than our U shaped model. If we again budget for the U scenario, the downside is we maybe should have ramped up business investment a little sooner but on the upside we will have been sleeping at night.

What our back of the napkin game theory tells us is that although we really don’t know what the future looks like we can make intelligent budgeting choices which are likely to see us through until the economy improves. Therefore, businesses, households and certainly Toyjobs should budget for a U shaped recovery and if things turn out to be better than that – great.

Whew. Enough of that! Obviously it’s been sitting and stewing in my head for quite a while and I feel much better now that it’s OUT! Anecdotally, over just the last three or four weeks toy company hiring is beginning to get a little stronger. The key words here are: “beginning” and “a little”. Hiring is far from robust but it’s a lot better than the total job drought of the previous nine months. As discussed above, businesses are “feeling” a little bit better about the future even if the actual economic numbers reveal only that things are no longer getting worse. The seasonal nature of the toy industry impacts hiring as well. Retailers confirm their orders later and later even as manufacturing and shipping cycles grow longer and longer. More toy companies find that they don’t know how their year is going to turn out until July or August. That usually causes an increase in toy industry hiring from late August until the end of the year. This time around, the usual August bump coincides with people generally feeling better about the economy at large so that this year I expect the usual trend to apply albeit on a more muted basis. Unfortunately for job seekers in the toy industry, next year the usual seasonal hiring pattern will also apply. I see toy industry hiring through the end of the year being better but not as strong as usual.

Toy companies will hit their reset button in January. There will be continued uncertainty in the economy. Retailers will continue to hold off on order confirmations until just after the last possible second. My best guess is that we will see another year of weak (although not as bad as this year) toy industry hiring until we hit that early August time frame. Then, as usual, it will improve. How much will it improve? It will depend on the real economy and real economy factors like: unemployment, GDP growth, retail sales, etc. I wish I could chart a clearer course but I’m smart enough to know that I’m not smart enough to tell the future. That light at the end of the tunnel just might be an oncoming train.

Muddling thru,

Tom Keoughan

P.S. Disney’s takeover of Marvel looks like a great strategic deal for Disney as it can drive Marvel’s product portfolio across all of its business platforms. It will also have the opportunity to build Marvel’s myriad underdeveloped brands. Marvel’s shareholders make out well in receiving both cash and shares in a less volatile growth vehicle. Although Disney paid full price (a 29% premium), in the longer term Disney shareholders should benefit by obtaining a strong strategic match that is large enough to move the earnings needle. That said, there are some current licensing entanglements with rival studios that Disney may prefer not to have. They will have to either wait them out or buy them out. It appears that, aside from the usual backoffice consolidation, most Marvel employees will remain although that can always change over time. Oh, in case you were worried about him, fear not, Ike Perlmutter makes out quite well as usual. In addition to reaping a handy $600 million he will become Disney’s second largest shareholder, just behind the equally cuddly Steve Jobs.

P.P.S. (Driving the admins crazy!) Our final China Report Article – “The Yin and Yang of U.S. – China Relations” is pretty much a must read.

Have a great holiday weekend!!

By ToyJobs|2020-11-20T08:51:04-06:00August 1st, 2009|ToyJobs Blog|Comments Off

“Less Bad” is the “New Normal”

Clichés spring like “green shoots” from the mouths of journalists, TV talking heads and mush mouthed politicos. The media seems to have abandoned its age old “bad news sells” model with the sudden realization that too much bad news may put them out of business. They have joined with beltway types to try to talk up consumer confidence in the hopes that a return to shopping will jump start the economy in a way that the current stimulus package will not until 2011.

In many ways it seems to be working. The rate of new layoffs is slowing even though I would like to see a couple of more months of data before declaring it a trend. The headline unemployment number is 9.4% and that is very scary but perhaps not as scary as it seems because it is a cumulative number which includes everyone who was laid off prior to the most recent month. On the other hand, the official unemployment number is not what we should be looking at in the first place.

A broader statistic which gives us a much more realistic view of the unemployment picture is U6. U6 includes people who have been looking for a job for so long that they have either given up in disgust or decided to just sit back and wait for things to get better before they even try. They are not actively looking for a job but they would take one if it was offered to them. The “regular vanilla” unemployment figure does not include these people. U6 does. It also includes people looking for full time jobs who have only been able to find part time jobs but really want full time jobs. The “regular vanilla” unemployment figure does not include these people. Huh. U6 does. U6 for May was 16.4%. Whoa! 16.4% is a HUGE number! More than one in six Americans is either unemployed or underemployed (do you want fries with that?). It suddenly becomes very clear why the government talks about the “regular vanilla” unemployment figure and why you have never heard of U6.

So, things have indeed gotten very bad although for the time being they have ceased getting worse. It has to be considered very good news that the global financial system is no longer teetering on the brink of total collapse. That said, we still have a severe recession to work through. To paraphrase Warren Buffett (I’d quote him but I can’t write that fast) “The financial climate is much improved from the October through March period which sets up the stage for the economy to grow stronger. That hasn’t happened yet but we’ve reached the point where it can.” Many are predicting a soupbowl shaped recovery. The economy came down hard and will drag along the bottom for quite a while before it starts back up the other side. That sounds just about right although I have no way of knowing. In fact, I’m still a little leery of other shoes yet to drop (commercial real estate, credit card debt, and we still haven’t exactly gotten rid of all that toxic waste yet, have we?). If I seem to be prevaricating and slowly feeling my way along like a blind man in the dark, well, I am.

This leads everybody from consumers to manufacturers to retailers to remain extremely cautious. For their part, retailers are taking longer than ever to finalize orders. Of course, they don’t see themselves as being late. They just want to push as much risk as possible onto their vendors (ahem, “partners”). With so many Chinese factories having closed, so many laid off Chinese workers, and the lengthened quality regimen, we are fast approaching the point when manufacturers will be physically unable to deliver goods by the time that retailers want them. Later commitments don’t mix well with longer cycle times. The prevailing retailer attitude seems to be “We don’t care – get it here or somebody else will fill our shelves.” But who? And with what? Why, the big boys, of course. Mattel, Hasbro and Lego (do we still consider Leapfrog a big boy?) can afford to tool up and manufacture earlier because they get to amortize costs over a gazillion units sold. They also get earlier commitments from retail than the rest of the toy industry. This means that the shelves will be filled with less variety this year.

Another onerous note is that Wal-Mart is reducing its toy space by more than half. The toy department itself has never been all that profitable for Wal-Mart. Instead it has been used as a loss leader to drive foot traffic during the last four months of the year. Over the last five or six years, Wal-Mart has committed heavily to the grocery business. Grocery is also a low margin business but one where Wal-Mart has an advantage because it is not unionized . . . . . yet. The move into grocery has worked out brilliantly as a traffic builder. The average Wal-Mart customer now visits their stores once a week rather than once a month. The toy aisle is no longer needed to drive traffic. Of course, they’ll keep their hand in and stock the obvious big company items backed by big advertising dollars but they’re not going to think too hard about the toy industry anymore – no more guessing on what will be a hot seller. They’re just going to focus on moving merchandise – like big jars of pickles. This will obviously benefit big toy companies who are able to make big TV advertising commitments. Toys ‘R’ Us also stands to benefit – if they are able to execute. It’s as if Wal-Mart is taking its foot off of TRU’s throat after nearly destroying them. It’s certainly not an act of good will, it’s just that toys aren’t that important to Wal-Mart anymore.

As for toy company hiring, we are still going through a dark period where there have been many layoffs and very little hiring. As I have said in this space before, most companies tell me that operationally they need people but their banks won’t let them hire anyone. Most companies operate on lines of credit, letters of credit and bank loans. This year many banks have said something on the order of “we’ll give you seventy percent of your usual line of credit but you’ve got to cut costs by twenty percent”. Due to the seasonal nature of the toy business this has pushed many companies to the brink of solvency. Many companies are meeting with their banks every two weeks to be told which bills they are allowed to pay. It’s almost as if the banks think we don’t know who caused the financial crisis in the first place. It would be nice to see them get their own houses in order before making judgments about others.

Toyjobs has noticed that the hiring climate has grown tricklingly better during May and early June. I would anticipate that by the end of the second quarter retailers will have mostly finalized their orders and toy companies will be able to approach the banks with a better story to tell. This leads me to believe that by late August/September toy industry hiring will have improved noticeably although it will still be a long way from good (it’s easy to improve noticeably from zero). 2010 should be better as we move along the gradually inclining slope of the soupbowl curve. Unfortunately, retailers will continue to push off purchasing commitments as long as possible. Toy companies won’t be able to breathe easier until July/August meaning that it likely won’t be until late August/September that there is a true resurgence in hiring.

Muddling thru,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00June 8th, 2009|ToyJobs Blog|Comments Off

Poor Economy Continues to Dog Toy Industry

The economy remains stagnant as continued layoffs and tight credit have left consumers cautious. Even the currently employed have stopped spending and are hoarding cash because it seems that on any given Friday anybody can be laid off.

Retail sales continue to be poor and have even worsened after the brief January, February upturn which followed a dismal autumn. March retail sales fell 1.1% from February and were down 9% from the same month year ago. The only bright spots were the usual suspects, discounters Wal-Mart, Costco, the Dollar stores and drug chains.

On the brighter side the financial situation does seem to be stabilizing although still not recovering. The LIBOR rate (the interest rate at which banks lend to each other) is now in close to normal territory and the stock market has been recovering as bargain hunters have appeared. Of course, all evidence of “stabilization” could evaporate in a day and we could be back in the freefall zone of last autumn.

The employment situation continues to be bad with lots of people looking for work but few available jobs. Companies are still saying that although operationally they need additional people they are not hiring due to financial concerns and banking restraints. In “the tiniest glimmer of hope” department, Toyjobs has just recently noticed a slight uptick in the number of new search starts. It seems as if during the first quarter 98% of companies had a hiring freeze but now that we’re in the second quarter only 85% do. That is not exactly overwhelmingly good news but we can hope that it becomes a trend that continues.

In a humorous note, Reuters reported on April 17th that Isaac Larian of MGA has offered Mattel an opportunity to pay MGA for the Bratz line after the court awarded Mattel $100 million from MGA and ordered MGA to stop making Bratz, which the court determined was misappropriated from Mattel in the first place. That order was later suspended until the end of 2009. Toyjobs only comment is: “Gee, what a kind and generous offer from Mr. Larian. Bless his heart.”

Muddling Thru,
Tom Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00April 14th, 2009|ToyJobs Blog|Comments Off

Toyjobs Wins Judgement Against A-Ha Toys

The Superior Court of New Jersey has awarded Toyjobs a default judgement against A-HA Toys. The court is expected to rule on Toyjobs’ suit against A-HA president, Ivars Sondors, shortly.

Toyjobs’ president Tom Keoughan said “Whenever I hear about a company not paying its vendors, I become very reluctant to do business with that company. I always wonder how companies that don’t pay their vendors will be able to deliver goods to their customers.

By ToyJobs|2009-02-28T09:00:49-06:00February 28th, 2009|ToyJobs Blog|Comments Off

Toyjobs Files Suit Against A-Ha Toys

Toy industry recruiter Toyjobs has filed suit in the Superior Court of New Jersey against A-Ha Toys, Inc. and its president Ivars Sondors. The complaint lists breach of contract, unjust enrichment, fraud and various other allegations.

Toyjobs president Tom Keoughan stated “Every four or five years we have a situation where a company contracts with us to find employees for them and they tell us that they aren’t interested in any of our candidates. That is, of course, their prerogative. The problem arises if they then go behind our backs and hire our candidates without telling us or compensating us for our services”.

Keoughan further states “I don’t know what people who do this are thinking. We’re out in the toy marketplace every day and we are going to find out about it. We are certainly going to demand payment and go about collecting it to the best of our ability. Filing suit is a time consuming and potentially costly undertaking that Toyjobs would not pursue unless we were absolutely confident of our position. In twenty-seven years of doing business, we have never lost a case of this type.”

By ToyJobs|2008-10-07T09:00:50-05:00October 7th, 2008|ToyJobs Blog|Comments Off

TRU Board Wakes Up…Finally

The Toys ‘R’ Us board finally awoke from a deep five year slumber when one of their members suddenly came to and was heard to shout: “Dude, Where’s My Company?” The Dude had spent the last year building a mega million dollar headquarters, buying pricey Stargates and awarding himself 5 million dollar bonuses while Walmart ate all of his lunch and a large portion of his dinner too. This is the second toy retailing institution that…Well, you know. None of this was able to rouse the board and they seem still to be a bit drowsy because The Dude is still around although we suspect that he’s no longer really at the helm. (Step up Mr. G.)

At this time, it’s difficult to say exactly how this will affect toy manufacturers, except that it won’t be good, because TRU has not provided very complete information and isn’t answering any questions. Looking back over the last five years perhaps we shouldn’t assume that they know what they’re going to do at all.

It appears that the board, The Dude and several senior executives are going to jump ship and hop into the much smaller but much healthier lifeboat of Babies ‘R’ Us. How the separation will be achieved is pretty much open to speculation. Speculation at the expense of others can be a fun and stimulating pastime and so we’ll give it a go.

First, it seems fairly certain that TRU will shutter a significant number of unprofitable stores (100+) and either sell off the real estate or sell off long term low rent leases similar to what K-Mart recently did. This would be a smart move and could raise significant capital. The question is what will they do with the cash? They could return it to shareholders – not very likely. Since it is toy stores being sold they could give it to the remaining toy division to patch up and rebuild. Perhaps, but I suspect that the toy division will mainly end up being recapitalized by selling off its international unit. It could go to Babies ‘R’ Us along with the board, The Dude and the rest of the ship jumpers…hmm. Babies ‘R’ Us could use the loot to fuel a long term growth strategy or it’s also likely that they may need a brand spanking new mega million dollar headquarters and perhaps their own Stargate or two. As a registered cynic, I suspect that is where most of the money will go with just enough being given to the toy division to keep up appearances and satisfy the board’s liability insurance company.

The toy business could be sold to a strategic partner but I don’t think that they are exactly lining up and any strategic buyer would have to be so incredibly stupid that there would be very little chance that they could ever fix the damn thing. It could be spun off to shareholders. “Dear Shareholders, please accept this falling knife as a symbol of the esteem in which we hold you.”

What would seem to make the most sense would be for the toy business to be either taken private or sold to a private equity group. Without having to waste time, money and energy on the wacky growth strategies needed to please the equity investors who somehow never figured out that this was a mature business; a slimmed down, better operated toy division could be a real cash cow. In these uncertain times there is nothing wrong with cash. I like cash. Please send ME your cash.

A possible silver lining in all of this is that the toy division will be run by John Barbour who recently ran Toys ‘R’ Us International. John is a smart, honest, hardworking guy who very importantly has spent most of his career on the manufacturers side. Hopefully, this might mean he will be more willing to “partner” with his vendors and less likely to pull the type of crap that Toys ‘R’ Us has become all too well known for over the last ten years. This idea should be tempered though with the knowledge that Mr. Barbour will be performing emergency surgery and has an extremely tough job ahead of him (note: Mr. Markee opted to hop into the lifeboat.)

In the very short term our eyes are riveted on the words: “150 million dollars in writedowns.” Toys ‘R’ Us is genetically incapable of swallowing this type of a thing and vendors had better watch out. The company’s long term motto for vendors – “When we suck, you pay!” will certainly be in force.

How does all this affect toy industry hiring? Hiring has continued to be robust through July. In fact, at Toyjobs, July was our best single month in twenty three years of practice. Most of this can be attributed to closing out searches which began in May and June. New search starts in July slowed due to the usual seasonal fluctuations and the same appears to be happening in early August.

For the year, toy industry hiring has been way up with the exception of Mattel which seems to be desperately trying to manage earnings through layoffs rather than growth. The economy has turned the corner, although as I’ve said before, the toy industry uptick has been much more muted. This is likely because the industry’s problems are not caused by consumer demand but by retailers. These troubles will continue until someone devises a new method if distribution which lessens dependence on Walmart, Toys ‘R’ Us and the like. So far, I’m not smart enough to figure that out, but hopefully someone will be. In the meantime, toy companies have been running so lean over the last couple of years, that even a modest upturn have left manufacturers scrambling to get the work done and every company seems to need a couple of extra pairs of hands.

Up until last week’s news, I was predicting that the summer recruiting slowdown would end in late August as it usually does and that hiring would be strong through the end of the year. The TRU news throws a new uncertainty into the mix and I suspect that until there is more explicit information that toy companies will temporarily act like deer staring into headlights until they can figure out how all this affects them. Ultimately, Walmart and Target will come a-knocking, looking for samples – faster, earlier, cheaper and with lots of changes and toy companies will be forced to hire people to get the job done.

While people are currently enjoying a slower, more relaxing summer pace; the combination of last weeks news and the fact that October Toy Fair is not as far away as it looks has prompted us to include the following article as a public service. It provides some techniques purported to help us each to reduce stress in the workplace (toy business? stressful?).

Will they work? I don’t know yet but I’m going to start practicing now. By the time the September ramp up rolls around it will be way too late.

All the best,
Tom Keoughan

By ToyJobs|2020-11-20T08:51:05-06:00August 17th, 2004|ToyJobs Blog|Comments Off

Licensing Show Buzzing For A Change

Licensing Show was humming even though the hottest thing there was the weather. One senior retail executive we spoke with thought that the Nickelodeon and Dreamworks lines looked very promising. Traffic seemed way up from the last two years and the mood was generally very positive with manufacturing companies looking to do something. Of course, with the continued dumbing down of the retail buyer, unless you have a big well known brand, a hot license is about the only way in the door.

It will be interesting to see how the trend of retailers going direct to the licensor and the Asian factory will work out. We’ll see how they like it when they get stuck with a couple million pieces of licensed merchandise from a movie flop. I hope they’re hungry. This practice may shave a few nickels from their cost, but greatly increases their risk. It will be fun to watch the buying wonks deal with that – risk-taking being completely alien to the species.

Toy industry hiring has continued at a rapid pace although the number of new searches has begun to slow due to seasonal factors. The combination of summer and sweat and fingernail biting over ever late orders causes an annual cool down at this time. New jobs should begin to ramp up again by mid August, and we foresee robust hiring throughout the end of the year.

All the best,

Tom Keoughan

By ToyJobs|2004-06-17T11:01:04-05:00June 17th, 2004|ToyJobs Blog|Comments Off