Within just two weeks of laying their bombshell on the toy industry, Toys ‘R’ Us was staggering around like a drunken man. The Dude was making phone calls to toy executives and back pedaling furiously. At the August 24th meeting, he told analysts that talk of selling the toy division may be premature. This is a little confusing in that it was the Dude himself who started that talk. Clarification was not forthcoming because TRU cancelled its regular Q&A session with analysts. No one that I’ve talked to believes a word of this retraction and it is generally attributed to attempt at damage control by a management that is so inept, that they can’t even figure out how to time a major announcement.
There has been talk that the Dude is planning a master stroke of adding fast food and arcade games to their stores. This sounds like one of his already failed “we’re not a store, we’re an experience” strategies. To be sure this may attract ‘tweens and younger teens, but with kids “growing up earlier” this is not a crowd that is likely to be buying a lot of Barbies, Leapfrogs, or stuffed animals. It almost appears as if heavy drinking has been substituted for sound business strategy.
In addition to TRU’s downward spiral into madness, the toy industry has been hampered by both a shortage of chips and high oil prices which is fueling increased electricity costs in China, transportation costs everywhere and an over 30% rise in resin prices. Walmart will not eat these cost increases (at least not this year) thus sparking increased margin erosion.
Also looming is TRU’s announced 150 million in writedowns. For toy manufacturers total sales will most likely be better than last year, but margins could very easily be worse.
In terms of toy industry hiring, I am happy to announce that my predictions of last month were dead wrong. Coming out of the seasonal summer slowdown hiring has accelerated and is now quite robust. There is not a lot of wholesale hiring going on but everyone seems to need an extra pair of hands or two. The coming October toy fair should be interesting to say the least. I look forward to seeing you all there.
All the best,