About Toy Jobs

Uncertainty.

I hope everyone is enjoying a strong Holiday Sell-Through Season. After the misery of 2023, current year sales seem much improved. The National Retail Federation is expecting holiday spending to reach a record high. Even though shoppers are weighed down by higher prices for necessities such as food and car insurance(!). Walmart and Amazon had record-breaking sales on Black Friday and Cyber Monday. Discount chains like T.J. Maxx are also doing well. That’s an indicator that consumers are willing to spend when they see the right products at reasonable prices. If you are a higher priced retailer then tjn2times are tough. If you are Target, you just have to hope that people are picking out something extra when they come in to buy their Taylor Swift Sparkling Typo Dream Book. It appears that while not “great” this year will turn out much better than last. Some companies will break through and have very good years but most will at least be able to breathe a sigh of relief.

That leaves us thinking about next year and if there is a single word that captures the year to come it is – Uncertainty. The incoming Trump administration has been threatening tariffs – “Big, Byootiful Tariffs.” Of course, there is a difference between “campaign speech” and governing action.

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Trump has been known to bluster and blow only to partially dial things back later. I’ve always seen him as a guy who won’t split the sandwich with you. Rather, he’ll loudly demand three quarters of it in the hopes that he’ll get two thirds. Putting tariffs in place won’t be his goal but rather will be a negotiating tool used in order to achieve certain trade and foreign policy objectives. That may be alright in the long run but what does it mean for us in 2025? Trump is not even in office yet and we have already seen Canada and Mexico start to fold to his demands. China, on the other hand, is likely to take a much harder line. China has a range of measures it can use if it decides to retaliate. It can restrict exports of critical minerals or pharmaceutical precursors. It can punish U.S. multinationals’ Chinese operations, sell off U.S. Treasury bonds or devalue their own currency. That said, they are also vulnerable due to what is currently a very weak domestic economy, which has been caused by the bursting of an enormous real estate bubble.

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What will Trump do? Early on in his campaign he talked about 60% tariffs on China which would be catastrophic to both the U.S. and Chinese economies. He seems to have dialed that back and is now talking about an additional 10% tariff on Chinese imports. Something like that could probably be partially distributed throughout the supply chain…partially. We should also note that tariff threats are likely to be rolled in slowly. If we look at the last Trump administration, tariff threats were made along with a target date leaving time to negotiate. Last time we also saw target dates repeatedly postponed. Will that happen this time? Who knows? Last time around the toy industry was able to duck tariffs altogether for several years. Will we be able to do the same on this go ‘round? Who knows?

The third leg of the uncertainty stool is the big retailers. Will tariffs be passed on to the consumer? Or will retailers hold their price points firm? How firm will they hold those price points? How much will they be willing to participate in the distributing tariff costs through the supply chain? I expect not much.

Toy companies are left waiting for three actors to make decisions before we can react. What will Trump do? We know that Trump likes to be unpredictable. How will the Chinese respond? Probably in a more incremental way but with a hard line approach. How will the major retailers respond to the whole mess? Probably, they are the easiest to predict. Each actor has multiple choices and when we multiply that by three we get a large number of possibly permutations. It’s sort of like a game of four-dimensional chess. Uncertainty.

Stay nimble, my friends.

 

Happy Holidays!

Tom Keoughan

By |2024-12-09T12:42:31-06:00December 9th, 2024|About Toy Jobs|0 Comments

Slow and Continuing Improvement in the Toy Biz

Let us start with a quick review. 2023 was a very difficult year for toy and other consumer goods companies due to a severe inventory glut. That left toy companies with less cash on hand entering into 2024. High interest rates also meant that companies were reluctant to borrow any more than they absolutely had to.

Early in 2024, the industry responded by tightening it’s belt. Large companies were engaged in major layoffs but at the same time many small and medium companies continued to hire. When we came to July, that hiring came to a screeching halt.

Shortly thereafter we entered the elongated LA Toy Preview Marathon. I’m going to qualify the following by stating that I did not attend so these observations comes from numerous attending toy executives that I have spoken with. Opinions were very divided with many attendees reporting that they were quite enthusiastic with the event while numerous others described it with a ten letter word that begins with cluster_ _ _ _.

It was almost universally felt that the whole thing was just way too long. Some were pretty disappointed by what I will call Pasierb’s Final Fumble. It seems that the Toy Association held all of their major events during a week when there were no buyers there: Oopsy!

Greg Ahearn

Fortunately, most people were confident that the ever-affable Greg Ahearn, who has a long toy industry history and many strong relationships within the industry will be able to make great improvements. That said, while I agree that he will be able to improve the situation, I fear that he faces an insurmountable obstacle. Major power players in the industry simply don’t want to cooperate. Mattel, MGA, and some of the large LA-based companies don’t want to show their wares to buyers at the same time as their smaller, nimbler, and more creative competitors. When the toy industry sets their dates, those larger companies can simply change theirs. Add to that the largest retailers Walmart, Target, and Amazon all seem to want their own weeks. This leads to a lot of downtime, heightened expenses and running back and forth for the industry as a whole. Although there are a lot of competing interests, I am pretty sure that Greg Ahearn can shorten the 6 week marathon but…can he bring it in at under 4 weeks? I’m not so sure.

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On the hiring front, I have been *predicting* (hoping) that after the shows, toy manufacturers would getback home and crunch their results. They would then look at the calendar and realize that if we start looking for people now, we can start them in the next calendar year and on next year’s budget. Sure enough, during the first week of October, my phones began to ring.

I have optimism for the holiday sales season as I notice that, despite high credit card debt, retail sales and spending has continued to grow. I do take note, however, that consumers seem to be looking for bargains which will likely crimp margins. Christmas, once again, will come and increasing retail spending should lead to increased hiring.

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The pandemic’s ripples continue to get smaller but they are still with us. It’s never smooth sailing for the toy industry. Every year poses a new and exciting challenge for this industry of ours. In 2025, we will likely kick off the year with the return of the East Coast Dockworkers Strike. That’s just for starters.

 

Cautiously optimistic,
Tom Keoughan

By |2024-10-23T07:49:54-05:00October 21st, 2024|About Toy Jobs|0 Comments

Be Ready to be Nimble

Mixed signals behind us.  Mixed signals ahead.  Mixed signals all around.  On the one hand, job growth has been weakening for a while and last week was strongly revised in a downward direction.  Credit card debt and defaults have grown to a very high level and that debt is at sky high interest rates of around 23%.  Many companies led by Home Depot, McDonald’s, Macy’s and Disney have sounded alarms about weakening consumer spending after years of pent-up pandemic demand.  On the other hand many lower cost retailers like Walmart, Target and T.J.Maxx have been hitting it out of the park.

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image via newyorkfed.org

Many prognosticators (beware the fortune tellers) are saying that we’re on the cusp of a recession but then they’ve been saying that for years.  If the downturn didn’t happen 18 or 24 months ago, why should we expect it to happen now.  I suspect that consumers are “trading down” and looking for bargains. And why not?  After 20 plus percent cumulative inflation during the last four years; today’s bargain is yesterday’s normal price.  What’s going to happen in the future?  A reduction in the interest rates would be welcome but anybody who tells you that they know what the future will be, isn’t being truthful.

What does that mean for toy industry hiring?  Since Covid began I’ve been using the allegory that the pandemic was like a big rock thrown in a quiet pond.  I’m sticking with it.  Over time the ripples have been getting smaller, but the ripples are still with us.  Last year the ripple was an inventory glut which in turn was a reaction to the previous year’s inventory shortage.  Due to the glut, retailers bought much less merchandise as they already had a backlog piled upon their shelves and in their warehouses.  Toy manufacturers had goods piling up on their shelves too.  That meant they either had to blow it out rock bottom or pay to store it as much of it potentially lost value.

In the first six months of 2024 the toy headlines were all about major layoffs and reorganizations at the largest toy companies.  A few noteworthy companies were sold as well.  That said, many small and medium-sized companies were hiring.  Not hand over fist hiring but looking to add one or two key players.  Starting in July, toy industry hiring slowed considerably.  I see three potential explanations for this, and I think it’s probably a bit of each.

First, since toy companies didn’t sell as many toys last year, their annual pay day in January and February was much reduced.  That began to pinch by mid-year and companies were reluctant to borrow a lot of money while interest rates remained high.

Second, it’s summer!  Hiring Is typically dead in July.  People are away on vacation.  Toy executives go into hiding as they hope retailers won’t cancel orders at the last minute, etc.  That usually rebounds in August as inventory makes its way to retailers, and toy companies suddenly realize that in early October the following year’s sales cycle will begin with Fall Previews.  If they want to change or add to their sales teams, they will have to move FAST!  This year that August rebound hasn’t happened.

Which leads us to our third explanation.  The trade show schedule has changed.  The new “streamlined” Fall Previews have become a six-week marathon (longer if you’re going to Hong Kong) of toy people rushing to and from Los Angeles.  I honestly don’t know how anybody gets their work done.  I suppose hotels are happy to keep laundering the same shirts at peak rates.

Hopefully, as things begin to settle down in October, companies will put together their forecasts.  They’ll see that 2024 won’t be a great year but it will be better than 2023.  They’ll see that the pandemic ripples while still there are continuing to recede and business will continue to improve in 2025.  New calendars will arrive and they’ll come to realize “that if we start hiring searches now, we can start them in the new year and on the new year’s budget.”

That’s my hope.  What is my prognostication?  I don’t have one other than a piece of advice which some may find helpful and others will not.  Take a stance of being optimistically cautious which is one notch below my usual cautiously optimistic.  Things are moving rapidly in all directions right now and it’s impossible to read them accurately.  Keep your weight on your back foot but ….. Be Ready To Be Nimble.

All the best,
Tom Keoughan

By |2024-08-27T05:34:00-05:00August 27th, 2024|About Toy Jobs|0 Comments

Heavy Toy Industry Hiring Despite the Headlines

The wild world of toy industry hiring is as crazy as ever. While the headlines are all about layoffs at the big companies, the small and medium-sized companies have been hiring hand over fist. Beginning in February, Toyjobs has been running at mach speed just to keep up with demand. Consequently, we have helped many clients upgrade their staffs and helped many toy industry inhabitants improve their situations and career prospects.

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image via basicfun.com

It’s been good to see a surge in hiring for product development positions. This indicates that company are emphasizing the development of new product lines. We hope this will lead to growth after a difficult environment in 2023. There has been a particular emphasis in hiring product developers and designers in girl’s toys and plush. This likely stems from many companies trying to emulate their success of Squishmallows and Littlest Pet Shop.

Most companies are giving me positive reports coming back from LA Spring Previews so hopefully the strong hiring trend will continue. That said, I remain concerned about growing consumer debt and a large increase in credit card delinquencies. Americans held more than $1.1 trillion on their credit cards at the end of 2023, an all-time high. Nearly 10 percent of that was seriously delinquent, which is defined as 90 days or more late. Even more alarming is the rate at which people are becoming seriously delinquent. This surged to 6.4 per cent in the fourth quarter, up from 4 per cent at the end of 2022, and is the highest level in more than a decade. Additionally, the interest on credit card debt is not compounding at a rate of nearly 23%.

delinquent debt

image via wsj.com

While inflation has come down from the 9.1% highs of 2022 the compounded inflation of the last three years has left consumer prices much higher. Some retailers have noticed even higher income consumers feeling squeezed. Dollar Tree recently reported that their fastest growing customer demographic earns more than $125,000 a year. Similarly, Walmart reported that one of the biggest contributors to share gained from other retailers was from shoppers earning more than $100,000. Everyone is feeling stretched and the only group that owes more money than the American consumer might be Toys’R’Us Canada.

So, temperate and sunny while at the same time hearing the low rumble of thunder in the distance. We’ll have to wait and see how things work out. Here at Toyjobs we are cautiously optimistic – as ever. We’re running as fast as we can while trying to maintain our weight on our back foot. It’s a bit awkward. Hoping I don’t end up ass over teakettle.

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By |2024-05-13T14:12:55-05:00May 13th, 2024|About Toy Jobs|0 Comments

Proceed Quickly and with a Light Foot

Heading into 2024 toy manufacturers are mostly optimistic. The year 2022 had left us with an enormous inventory glut and retailers spent 2023 working down inventories. They ordered merchandise light and late. For Toyjobs that meant that the first four months was essentially dead. Fortunately, retail orders started finally advancing in May and consumers picked up the pace of their holiday shopping in November and December. Lo and behold, Christmas came once again.

The inventory pile up meant that most toy companies were flat to down 15% although there were a few exceptions. Flat to down isn’t good for anyone but let’s remember what we’re comparing it to. The pandemic pushed toy sales to rocket in 2020 and 2021. The pandemic wasn’t “normal” nor were the heightened sales volumes. We should instead be comparing our recent sales volumes to 2019. Those comps should lead us all to complain a little less loudly.

Retailers were mostly able to clear their inventories in 2023 and we’re coming into the new year pretty clean. Unfortunately, manufacturers still have excess goods stacked up in warehouses and sucking up storage fees. But on the whole, as we enter 2024, things look pretty positive.

Voyeurs should have an interesting time watching a couple of our industry behemoths. First, an activist investor is trying to force major changes at Mattel whose stock is at the same level it was at twenty years ago. And Hasbro said that it laid off 800 people last year and will do another 1100 in 2024. Those numbers are huge for a company of their size. Personally, I’m always a little suspicious when a public company announces massive layoffs. Oftentimes, big cutbacks are announced for Wall St. but never quite actually happen, at least in the numbers that were initially publicized. I’m hearing that a lot of the downsizing will happen in Hasbro’s redundant international operations where they often have full Sales, Marketing, and Logistics teams in every country. I mean, do we really need separate full offices in Germany, Austria, AND Belgium? Additionally, I am expecting major changes at Hasbro over the next few years. Rumors are rife but we’ll have to wait and watch the action. Popcorn please!

After a pretty miserable 2023, Toyjobs has started the year strong. Now that companies have crunched their holiday sales numbers and returned from Nuremburg, we expect hiring to accelerate. That said, there are some potential clouds on the horizon.tjch2 Credit card balances are elevated and growing higher at a time when high interest rates are making it harder to pay them off. Delinquencies on credit cards have doubled over the last two years. At the same time consumer bank balances have dropped precipitously. Add to that buy now, pay later services like Afterpay and Klarna surged 14% last year and people who use those services are more than twice as likely to already be delinquent on something else like a credit card, car loan, or mortgage. The concern is that consumers as a group are overextended at a time when it’s harder to pay off snowballing debt. Will they get a grip on it by next holiday sales season? I don’t know but I tend to think not. This is not likely to end well. My advice is to proceed quickly but with a light foot. Think of tip toeing quickly over a rickety bridge. I’ll see you out there. Track shoes and umbrella.

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All the best,
Tom Keoughan

By |2024-02-06T13:49:53-06:00February 6th, 2024|About Toy Jobs|0 Comments

Optimistic But Proceed With Caution

graph via wsj.comIt has been a difficult year for toy companies due to a massive inventory glut. In 2022, retailers bulked up orders and advanced shipping timelines hoping to thwart continuing pandemic-related supply chain chaos. This left shelves at both stores and warehouses groaning with excess goods. Retailers have spent the year working down inventories. Orders for new goods were light and late as they both reduced quantity and narrowed variety to bestsellers. Many retailers now say that they cleaned up their stock and are on more solid footing.

Light ordering meant less need for containerships and containers, the cost of which had skyrocketed during the pandemic. In addition, logistics companies ordered huge numbers of containerships to be built in the erroneous belief that demand would grow to the sky forever. Less need for shipping at a time of more ships has collapsed prices which is an obvious boon to manufacturers.

2023 has been a year to muddle and make it through. Most toy companies I speak with say they are flat to 15% down from 2022 sales. That said, they are almost uniformly optimistic about 2024. Their thinking is that reduced inventories and light ordering will largely empty the shelves by the end of the this year’s holiday sales season. Add in low transportation costs and companies are eagerly looking forward to 2024 with “Reasons to be Cheerful”:

However…despite gangbuster sales volumes during the five days from Thanksgiving through Cyber Monday overall retail sales have started to slow with an actual decline in October. Consumers are beginning to get squeezed by dwindling pandemic savings and the resumption of student loan payments. Job and wage growth has also started to slow. Perhaps most important is credit card debt. Credit card debt and delinquencies have soared this year and soared at a time of astronomical interest rates.

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American spending habits might not be sustainable much longer. I’m not saying that consumers won’t be in for one last splurge during the holidays. In fact, I kinda think that will be the case. What I am concerned about is that the hangover could set in early next year and it promises to be a doozy.

A recession has been forecast for about two years now but consumer spending has kept it at bay. The consumer may be beginning to crack and the recession may be about to roll in.

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That leaves us with a mixed view. My crystal ball is never very clear, but my best advice to friends, families, and toy companies is: “Proceed…but proceed with caution.” Of course, that’s my advice most of the time anyway so take it for what it’s worth.

Happy Holidays to All!
And a Happy Sell Through Season Too!

Tom Keoughan

By |2023-12-06T08:23:18-06:00December 4th, 2023|About Toy Jobs|0 Comments

Toy Industry Limping but Picking Up Speed

It’s been a difficult year for the toy industry. So, what else is new? It’s always something…and it’s usually something different. The inventory glut meant very little early year restocking by retailers. This has continued with buyers ordering less and late.

Most toy companies shutdown hiring and many even had layoffs during the first third of the year. But somewhere in the backs of our minds, we knew that if retailers wanted any new product at all for the holiday shopping season, they would have to turn “happy talk” into paper by about May 1st. While no one thought that would set off wholesale hiring, many of my clients were telling me that they needed one or two key players but that they weren’t going to commit to any hiring until retailers committed to orders. Privately, I was predicting/hoping that when the orders began the toy business would get a much needed jumpstart. In early May, with my fingers crossed, my phone began to ring…

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It’s been a busy summer and Toyjobs has been, and is in, the process of filling lot of Sales jobs. I’m hoping that after September previews and the New York Toy Fair that things will begin to open up for Marketing and Product Development jobs as well.

I view the pandemic like an asteroid hitting the ocean. First, we experienced a tsunami or two. Then BIG WAVES. The waves are slowly getting smaller now but the ripples will be felt for years.

For the toy industry, it has been a wild ride. From pandemic to shutdowns to amped up sales to supply chain crises and finally to inventory gluts. Retail short ordering will likely lead to empty shelves by the end of the year. Next year should see even smaller waves and business returning to something approaching normal. Stay focused. We’re through the worst of it.

I look forward to seeing you all in New York at the first major toy fair since 2020 (God, I hate the Javits Center 😊)

beat feet

Tom Keoughan

By |2023-08-15T14:52:09-05:00August 14th, 2023|About Toy Jobs|0 Comments

Deciphering the Jobs Report

Employment numbers seem to be a mad jumble. Is unemployment going up or going down? Are companies laying off or hiring? …or both? Last Fridays Jobs Report showed that 311,000 jobs were added yet the unemployment rate had moved up from 3.4% to 3.6%. How does that work?

As for the unemployment rate – more people “joined the workforce.” In the Department of Labor survey, if you say that you aren’t actively looking for work then you aren’t counted as part of the workforce. As people run out of government pandemic money at the same time that high inflation has everything costing more; more people get off of the sofa and start looking for work. They are then counted as “part of the workforce” and until they find a job, they are unemployed. The Labor Department considers sofa time to be some sort of a magic limbo as if when people starting looking for work they suddenly POP! into existence.

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image via everydaysciencestuff.com

As for hiring trends, they are still being driven by the reverberations of the pandemic. The Covid pandemic has been the largest mass event in most of our lifetimes. It was like a giant asteroid hit the ocean. No Bruce Willis to save us this time. The big splash sent tsunamis in every direction. The waves are smaller now but they are still pretty high and are still driving everything in their paths. It could take five or even ten years before the waves subside into ripples.

The pandemic affected the various sectors of the economy in different ways – some subtle, some more profound. Early on bars, restaurants, hotels, gyms, and spas all shut down, throwing all of those employees out of work. As people were staying home, ecommerce, streaming, and every manner of internet-related business boomed and had to be staffed up at a rapid clip.

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image via statistica.com

Currently, as we get back toward normal, the previously shuttered service economy is cranking up and all of those businesses are trying to restaff. At the same time, large tech companies extrapolated their rapid growth into the future and thought their businesses would quickly grow to the sky. They overhired on a massive scale and, as a result, are now laying off employees in droves.

In the toy industry, and in most consumer product businesses, people were working from home and they weren’t going out socially either. They feathered their nests and made their homes into castles. They loaded up on consumer goods – if they could get them. At the same time they were working from home, their kids were home, too. They were in school at home – sort of. Parents needed to find things to help their kids learn at home, be entertained at home, and…keep them occupied. This meant everything from toys to learning aids to arts and crafts to big backyard pools. Toy sales had a couple years of stellar growth. As consumer products sales rocketed up, inevitably supply chains began to experience shortages from start to finish in everything from raw materials, factory time, workers, and especially transportation.

After retailers were unable to get enough goods in 2021 to maximize their sales, they shifted their strategy. They ordered sooner, they ordered more, they ordered repeatedly. Manufacturers also wanted to maximize their sales so they were happy to ship more and ship early to make sure that their goods would reach the shelves in time for the 2022 holiday sales season.

Unfortunately, this was taking place just as we were moving into a period of sky high inflation. Inflation was particularly bad in the oil sector which, in turn, has feedback loops into everything else. For the toy industry, oil = plastics = raw materials. It is also the fuel for transportation from trucks to container ships and back to tracks again. Inflation caused consumers to start to buy less.

Toy sales for 2022 were flat. That said, it was a bit hard to shed too many tears after the incredible growth rates of 17% in 2020 and another 14% in 2021. After a couple of years like that, flat ain’t so bad. The real damage came because just as retailers and manufacturers were ramping up the consumer was dialing it down. This left us with an enormous inventory glut. In our last newsletter, we joked that Walmart might be holding Big Merch Bonfires in their most rural parking lots. That was tongue in cheek. Six weeks later, we’re hearing serious recurring rumors that Walmart dumped $1 billion dollars of merchandise at TJ Maxx.

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image via SILive.com

This is leading to a very tough first half for toy companies. True to form retailers are laying much of the financial responsibility for the inventory glut at the feet of their suppliers. Mark downs, chargebacks, call them what you will. “When times are good, we own the goods. When times are bad, we’re a consignment shoppe.” There is no post-holiday resupply and with so many marked down goods out there, it’s difficult for manufacturers to clear their own inventory. For 2023, retailers are playing it very close to the vest. They’re ordering slower. They’re ordering smaller. Their hope seems to be that they’ll be able to reorder when the inventory glut clears. Additionally, that gives top performers time to reveal themselves. The big question is will retailers place large enough orders to fulfill their holiday sales needs and will they place them soon enough to be built and shipped in time? Toy companies are left trying to decide whether to build and hold or just build less. With retailers’ most recent, of many recurring examples, that they are NOT suppliers’ partners red hot in their memories, and their pockets I suspect, that manufacturers will do the latter. I would not be surprised to see an inventory shortage and early empty shelves in holiday sales season 2023. This will be a difficult year but hopefully it is one of transition which helps reset the table for 2024 and beyond. It would be good to see the post pandemic waves continue to diminish to a level that it just a bit easier to navigate.

What does this all mean for toy industry hiring? I’m sure you’ve all seen the news of toy company layoffs. Especially the large ones like Hasbro and Mattel. Over the last two weeks there have been a smattering of smaller layoffs at smaller companies as well. Toyjobs has filled a few searches that were carryovers from projects that we started and expected to close last year. Thus far in 2023, there have been very few new search starts. There is a potential cloud break that I’m hearing about but not yet seeing. Many of my clients are telling me that they are planning to hire people but are being cautious until they get larger commitments from retailers. If retailers want goods to arrive in time for the holiday sales season they probably have to make those commitments by some time in May at the latest. I’m still not seeing it yet. It could be a sweet whisper on the wind…or it could be a siren song.

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image via aphunniblog.edu

Keep your weight on the back foot,

Tom Keoughan

By |2023-03-13T14:21:42-05:00March 13th, 2023|About Toy Jobs|0 Comments

Toyjobs First Half Forecast

While the much ballyhooed recession hasn’t hit yet, we do see signs of the economy starting to slow. Consumers, having been squeezed by high inflation and rising interest rates, have cut back on retail spending in both November and December. As the consumer goes – so goes the U.S. economy and companies are responding by beginning to pause hiring. While hiring was extremely robust in 2022, it is now also in the early stages of cooling down. I would say that December – January looks like an inflection point.

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image via wsj.com

The slowing rate of hiring will change the negotiating dynamic between hirers and hirees. During the last couple of years when workers have been hard to find, employees held the upper hand and could demand higher wages, greater workplace flexibility, etc. Over time the negotiating dynamic swings back and forth like a pendulum driven by economic conditions. But this pendulum effect also has a lag time as both parties tend to think that the environment is in their favor for longer than it really is. They also try to hold on to the advantage for as long as possible. This is true on both sides of the equation – employers and employees. We are right now at an inflection point where the employee advantage is just beginning to slip away but employees are not ready to believe it or admit it to themselves, while for employers it is still a bit too early to start applying pressure.

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Amidst this backdrop, the toy industry has its own set of problems which should be acute during the first half of 2023. Slower holiday sales have left us with a massive inventory glut both at the retail and the manufacturer level. Retailers have been advertising huge discounts. I wouldn’t be surprised if Walmart starting having Big Merch Bonfires in their most rural parking lots. Not only does this mean large markdowns for manufacturers but also that they are unlikely to have much in the way of first quarter resupply orders.

Second, China’s recent lurch from a policy of Covid Zero to Que Sera? Sera? Is leading to massive waves of infection across the country. While this will eventually begin to peter out the sudden change may prove to be especially hard on for China’s large elderly population which is severely under-vaccinated and when they are vaccinated it is with less effective vaccines. Knowing what we know about China’s demographics, a more cynical person might wonder if there wasn’t something sinister going on?

Additionally, we are in the midst of the Chinese Lunar New Year holidays and urban workers will be spreading Covid to families in the hinterlands where healthcare facilities are sparse and subpar. How might the health of families affect if and when workers return to their job?

Lastly, as China works its way through its self-manufactured Covid spike and begins to reopen that will cause the price of oil and therefor plastics to surge. An increasing price for key materials can’t be good for margins.

On the upside, the supply chain is continuing to unkink and it is predicted to be back close to “normal” by mid-year. We’ll have to wait and see how the change in China’s Covid policy affects that timeline.barbie pic Additionally, it is a strong year for kids movie releases, coming especially from Disney and Hasbro. Hopefully that will help drive consumers back to the stores next fall.

How does this all translate into toy industry hiring? At Toyjobs we are coming off an excellent 2022. That said, in January search starts have slowed but not stopped. To an extent, this is true every year as many retailers and manufacturers are still finishing up crunching their 2022 holidays sales numbers. My prediction is that for the first half of 2023, large toy companies will do very little hiring. Small companies will continue to do less but some hiring of key players. In a small company, it’s much harder to distribute additional workload across a small staff. Beyond the first half? I got nothin’…except to say that I think things will be better than the previous six months.

 

All the best,

Tom Keoughan

By |2023-02-02T13:03:52-06:00January 23rd, 2023|About Toy Jobs|0 Comments

Too Many Cross Currents

I don’t envy toy industry executives right now. Even in the best of times they are in the seasonal fashion business which is always tricky. This year there are so many cross currents that it must be difficult to know what to do. The only bright light I see is that two years of sky high freight rates and delivery delays have reverted back closer to normal. That said, the situation in China where most of the toy factories are located is very fluid. Amidst widespread protests, labor shortages, and a never-ending game of Covid lockdown Whac-a-mole, I can’t imagine that many company’s plans are actually following their desired timelines.

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Add to that cost input inflation. Paints, plastics, labor, fuel, and electricity have all risen dramatically in price over the last two years. Consumer prices have been soaring with people paying more for less. Except, it seems, toys and clothing. If I would have written in a college exam blue book for one of my Economics courses that we would have massive inflation AND an inventory glut at the same time, I definitely would not have gotten a passing grade. But here we are. Bentonville is at Defcon 1 with red lights flashing and sirens blaring.

My continuing forecast, based on an extremely cloud crystal ball, is that one half of population will Party Like It’s 1999 and keep spending on both goods and services in this first “post-pandemic” (Covid is still here but we’ve stopped behaving like it’s a pandemic) holiday season. Come January, the bills will come due – and with sky high interest rates attached.

For the other half of the population, hard times have already arrived.

Toy dollar sales volume will be lower but not really that bad as they face very difficult comparisons to the previous two years of explosive pandemic-driven growth. Margins, however, will be a different story. Toys are more expensive to make and an inventory glut has led to retail discounting beginning even before Halloween. Everybody will be trying to eke their profits out of their supplies margins – from retailer-to-toy company-to-factory-to-components and raw materials.

Inflation gluts will likely lead to lots of leftover merchandise after the holidays which will mean very little early year resupply in 2023 and a difficult first half for the toy business. This will come at about the same time that the consumer will be closing his then empty wallet.

Up until now, toy companies are continuing to hire. Toyjobs continues to have one of its best years ever after a short trade show induced dip, but I see dark clouds on the near horizon and they look like they’re heading this way.

I’m sorry that this piece is so scattered but with so many conflicting cross currents, my mind hasn’t coalesced (congealed?) around a coherent narrative.

May you live in interesting times,

Tom Keoughan

By |2022-12-07T08:38:16-06:00December 5th, 2022|About Toy Jobs|0 Comments
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