So what is with all the wild headline swings on retail sales numbers? On December 26th, Reuters put out “US Holiday Season Beats Expectations On a Late Shopping Surge” but then on January 14th they said “US Retail Sales Drop Biggest in 11 Months.” Oh! We had all been feeling rather good but were we wrong? Did we miss something? “Gee, I thought I had read that ShopperTrak had reported that holiday sales had risen 4.6% and Third Quarter GDP rose 5% and we all know that gasoline prices are lower. What’s going on?” Yes indeed, the Commerce Department put out a report on January 14th that retail sales for December had dropped a seasonally adjusted 0.9%. One had to dig a little deeper to learn that plunging gasoline prices had caused gas station receipts to plummet by 6.5%. When you take service stations and restaurants out of the mix, the National Retail Federation reported a 4.0% holiday sales increase from the year before. How confusing! How misleading! Why would “news” organizations report headlines in such an irresponsible way? The only thing that makes sense is that they wanted to gather more eyeballs so they can sell more advertising and at a higher price. You get a sense of this when you check the weather on the TV News. Ever since Superstorm Sandy, any little sprinkle is treated like a major dramatic event.
There was more than a little sprinkle at Toys ‘R’ Us, which reported that sales at its US stores were down 5%. TRU execs did point out that gross margins did improve 2% but one doubts that was enough to grow overall profits. There is an overall sense of chaos in most departments at Toys ‘R’ US headquarters. Last September they announced their “New Strategy” which started more than a few eyes rolling. The new tack could be summed up as “we’re going to do the same things…but better.” Uh huh…
North of the border, Target is closing its 133 Canadian stores and will stiff its vendors. Suppliers will be asked to “Look, just eat it” if they want to continue selling to Target’s US stores. Fortunately, most of the senior toy executives from small and mid-sized firms that I’ve talked to haven’t been too badly burned. I suspect that may be different for the Mattel’s, Hasbro’s, and Lego’s of the world.
Ordinarily, I would think that two years is not a long enough period to give a startup to gain traction. That said, it appears that the rollout of Target Canada was botched from the start. Their locations were mainly former Zellers stores in rundown and out of the way shopping centers. They took on too much at the same time by opening their stores and trying to build out their supply chain simultaneously, which led to rows and rows of empty shelves. Many business enterprises, including Toyjobs, live by the basic business rule, “Never try to sell anything before you can deliver it.” Lastly, their pricing wasn’t competitive. Like New Coke, Target Canada will likely be a text book case for those seeking MBA’s of what not to do for decades to come.
Fortunately for the rest of us, the Toys ‘R’ Us and Target Canada debacles are merely outliers. Holiday retail sales were up the most in many years. The economy and the employment picture are both improving. Here at Toyjobs, we had a very solid year. Both search starts and placements were back to pre-2008 levels. I hesitate to say that things are back to normal because our client’s searches were overwhelmingly focused on sales executives. Marketing and product development jobs are just starting to percolate. Typically toy companies are looking for that type of talent starting in late February (when the trade show season ends) through July. It’s a little too early to know if those types of searches will ramp up again this spring but my discussions with Toy Execs lead me to believe that they will. The economic recovery has been hampered by misguided government policies. It’s like we’ve been trying to get rolling with the emergency brake still on. The environment is now improving at a much quicker pace. Things are getting better faster. It feels like the train has left the station and is finally picking up speed. We should all be able to breathe a little easier.
I look forward to seeing you all at The New York Toy Fair. Will there be snow?