For 2018 the big story in the toy industry hiring was the closing of Toys ‘R’ Us. Almost every toy and juvenile product manufacturer lost its second or third biggest customer. That meant that most of these companies cut their budgets while they went out in search of new channels of distribution. Reduced budgets usually means reduced headcount and nearly always means a slowdown in new hiring.

Are toy industry hiring trends poised to turn the corner? 2018 holiday sales overall were strong, rising 5.1%, excluding autos, according to Mastercard SpendingPulse. Online sales grew even more quickly at a whopping 19.1%. Of course, there were retail winners and losers. Macy’s, Kohl’s, and J.C. Penney performed poorly while Wal-Mart, Target, and Costco hit it out of the park. Wal-Mart and Target could have performed even better but they were running out of inventory during the last two weeks of the holiday shopping season, which coincided with a surge in foot traffic.

These numbers represent retail sales of ALL goods but what of the toy industry? I’ve heard all sorts of whisper numbers that US toy sales were down 7% or even 15%, but the most recent numbers that I’ve heard were that US toy sales declined 2-3%. At the same time, nearly all of the senior executives at small and medium-sized companies that I have spoken with have said that their sales either grew or that they were happy with their 2018 results. That leads me to believe that the bulk of the lost sales were suffered by the big toy companies like Mattel, Hasbro, and Lego, etc. After all, if a small toy company can add a couple of extra feet of shelf space at a Best Buy or a Cracker Barrel, that can be pretty meaningful. For a Mattel, it doesn’t even move the needle.

I see 2018 as a transition year and look for the toy industry to gain traction and move forward in 2019. We have several things going in our favor. First, the economy, although it might grow at a slower pace than last year, is still forecast to be strong. Only a few months ago, predictions were that the Fed would raise interest rates four times this year. Currently, interest rates are projected to only be raised a time or two. Employment continues to be super strong. Both factors support an economy that continues to grow.

Cautious ordering in 2018 means that retailers have little inventory carrying over going into this year. This bodes well for sales early in the year and also minimizes manufacturers being held up for mark-down money and diminishes retailers’ need to have blow out sales. In addition, we have a plethora of strong licensable kid’s movies coming out this year led by new Frozen and Toy Story films. That should mean strong sales for licensors and also translate to better sales for all as blockbuster properties drive increased shopping for kid’s products.

That said, there are two potential problems which could disrupt growing toy sales. First, we are still early in the 2019 toy trade show season. Reports that I’m getting are that the mood in Hong Kong was buoyant although not quite jubilant. We shall see how retailers react to toy manufacturers wares at Nuremburg and in New York.

Secondly, there is still the specter of Trump tariffs on Chinese-made goods looming on the horizon. Recently most of the chatter about resolution has been trending toward positive, with the exception of the Huawei imbroglio. I would imagine that we’ll end up with face-saving half measures where all sides are able to declare victory OR further postponements which unfortunately means further uncertainty. As the big orangey fella often says, “We’ll have to wait and see.”

If we’re able to dodge a trade war then I see a strengthening toy industry investing in new talent to help drive growth. A lot of pent-up demand has developed over the last two years as toy companies have tightened their belts to the point of them becoming tourniquets. As companies come out of their defensive posture, somebody has to have the ideas and somebody has to do the work. My outlook is – as it usually is – one of cautious optimism.

I look forward to seeing you all in New York!

Tom Keoughan