retail sales

Looking at Holiday Sales with Blurry Vision

Rosy forecasts but weak real world numbers make for uncertainty

Retail Projections

Early forecasts for Holiday Spending 2015 have been quite optimistic. Households have been enjoying fatter wallets, thanks to lower gasoline prices and cheaper imports, thanks to a stronger dollar. Retail sales reflected this by growing from January to July. NPD has reported that toy sales were up 6.5% in the first half and is projecting 6.2% growth for the year as a whole. The National Retail Federation is forecasting a holiday sales increase of 3.7%. That sounds good but less so when you consider last year’s 4.1% gain.

Retail Reality

Forecasts are fun and they can be helpful, but let’s not ignore what’s going on in the real world. A retail sales slowdown began in August and the Commerce Department recently revised the growth rate down to 0.0% for the month. September retail sales numbers were not perceptibly better with only a 0.1% growth rate. While low gas prices have been increasing disposable income and the strong dollar has led to some price deflation, consumers have been channeling additional spending toward services such as vacations and restaurant meals. Before we get pessimistic, let’s keep in mind that for economic data, some months counts less than others. August is rarely a good indicator – it’s summer! And September can often be a transitional month, especially when Labor Day arrives late, as it did this year.

Weak Jobs Reports

http://www.convexcm.com/wp-content/uploads/2015/10/nonfarm-payrolls.gifConcurrent to the slow-down in the retail sales is what we’re seeing in the job market. While job creation was strong in the first six months of the year, in September there were only 142,000 net new jobs. The numbers for July and August were also revised downward so that the third quarter monthly average for net new jobs was 167,000. That’s down from a monthly average of 198,000 for all of 2015 so far, which is down from 260,000 a month in 2014. While we should be concerned, again let’s not get overly pessimistic quite yet. Third quarter job gains have a historical tendency to run below average for the year and the deceleration often turns out to be temporary, rebounding in the October to December quarter. Again – it’s summer! …I’m going to wait for the October numbers before I really try to figure out what’s going on.

Wallowing Wal-Mart

The big news last week was Wal-Mart. The retail behemoth said that, while sales would be flat, earnings could fall as much as 12% next year. The lower margins will be the result of  “investments” in staffing at US stores and actual investments in ecommerce. When Wal-Mart experiences margin pressure – “Let the vendor beware!” – that can only mean bad news for its suppliers. Already they are asking all suppliers to pay fees to keep inventory in Wal-Mart warehouses and in some cases, they are strong arming vendors into accepting extended payment terms. One can only imagine that there will be more of this type of thing to come.

Strategically, changes needed to be made. Wal-Mart was falling behind in the retail wars. It’s difficult to compete with a company like Amazon, which is apparently comfortable not making any money for more than twenty years. From a timing standpoint, this makes perfect sense. New CEO Doug McMillon is a lifer who enjoys broad support. He is relatively young and will probably be in the CEO chair for another 10-15 years. He will be able to chart the new lows as his starting point as he goes about setting new strategy and rebuilding the retail juggernaut. He certainly has the time and resources to turn things around, but he has to get the strategy right. Not that he’ll notice, but we at Toyjobs wish him the best of luck.

Putting together a strategy to right the Wal-Mart ship is way above my pay grade, but I do have just one little question – we hear a lot about a “seamless customer strategy” and “click and collect” where a consumer can buy online and then stop by a store to pick up their purchases. My question is – why would I want to do that?? When I can simply purchase online and have my items delivered to my door. Just sayin’.

Dallas Fall Toy Preview

I found most people at the Dallas Fall Toy Preview to be very optimistic. The Frozen phenomenon seems to be fading fast butShopkins has been and Star Wars soon will be taking the world by storm. Wicked Cool had a very strong looking product line and over at the Auldey RC booth, people were busting through the doors.

Certainly there were the usual complaints – “Why are we here?” and “This place is empty.” But, when I asked manufacturers if their dance cards were full, they almost unanimously answered “yes.” In fact, in a completely new trend, instead of ambling in late, buyers were arriving for appointments early – even a day early. It seems that everyone wanted to get out of town as quickly as possible. I’m guessing that Thursday was completely dead, but can’t really tell you because I had already left for Austin to enjoy a much deserved long weekend of good food and good music.

October continues to be a crazy time in the toy industry with buyers and manufacturers pinballing between Dallas, LA, and Hong Kong at an accelerating rate and with even more disjointed schedules than ever. I know more than a few execs that will be in all three locations (simultaneously?) this month. The TIA still needs to figure this out. Things are getting messier, not better.

Navigating Conflicting Signals

What do we make of all of this conflicting noise? Should we try to make sense of things or just bury our heads in the sand? I feelhttp://www.canaltcm.com/wp-content/uploads/2012/05/Larry-David.jpglike I’m crossing a deep river barefoot and just feeling around for smooth stones with my feet. Not that anyone listens to me but I am going to acknowledge, but not put much faith in, all of the conflictinghttp://spencersterlingfinancial.com/wp-content/uploads/2014/11/alan_greenspan_02_2010.jpgsignals until I see the October numbers. Historically, October is a solid bellwether month. I’m optimistic but am going to be conservative in planning and spending until things actually happen. I think that there’s going to be an absolute ton of Star Wars merchandise sold but I also think there will be an awful lot of it left on the shelves. What then? “Curb Your Enthusiasm” and don’t become “Irrationally Exuberant.” It’s likely to be a strong holiday shopping season, but at this point that is far from certain. Be prepared for the aftermath. I am filled with both optimism and uncertainty and I’d prefer to be surprised on the upside.

May the force be with us,
Tom Keoughan

By | October 21st, 2015|ToyJobs Blog|Comments Off on Looking at Holiday Sales with Blurry Vision

Toyjobs Sees Surge in Search Starts

There’s a lot of gloom and doom on Wall Street right now which the media is only too happy to capitalize on in order to sell more advertising to more eyeballs (for the media it’s a sort of a stimulus program). However, most economists think there is only a 25-30% chance of a double dip recession. That percentage is up from 20-25% but economists overwhelmingly feel that the most likely outcome is continued slow growth (CSG?). While CSG doesn’t feel all that good, we’ve gotten used to it and it’s a helluva lot better than 2009, right?

Big investment managers on Wall Street are jumpy and stock indices are swinging wildly on any even minor news. “The current Greek bailout plan is in danger! Oh, heavens! …Gee, I think there will be another one. Factories in Pennsylvania, Delaware and South Jersey slowed down in the month of July! Oh, my.” I’m told (because I ain’t no expert) that a lot of this crazy volatility is caused by hare triggered computerized high frequency trading. The stock market has been trading in a range for a while so these programs are set to sell massive blocks of stock when we reach a point near the top of the range and conversely scoop stocks up when we near the bottom. This leads to wild gyrations which will take a little while to settle out.

On a positive note, retails sales were up 0.5% in July and figures for the previous two months were revised upward as well. Japanese supply chain disruptions are coming to an end. Prices have come down for oil, energy transportation and commodities. Unfortunately for the toy industry there are still problems in China with: manufacturing costs, labor, electricity and transportation.

The job market continues to slowly improve and unemployment has stabilized at just over 9%. The government also revised its May and June jobs reports upward. July non-farm payrolls increased by 117,000 (154,000 private market jobs minus government layoffs) which is the tenth straight monthly gain. 117,000 additional jobs per month isn’t enough to keep up with population growth (for that we need approx. 200,000) but it is heading in the right direction.

Total Nonfarm Payrolls All Employees

While it will be interesting to see the August numbers, we have to remember that during July and August we are in the midst of “the summer doldrums” when hiring slows down on a seasonal basis even during good times. I expect that we will see noticeably improved numbers in the October and November jobs reports. I hear you – “Where did that come from? What makes you say that, Tom?” Well, for one thing – I am in the employment business.

Toyjobs noticed a much improved employment atmosphere in January as companies started with new budgets after a decent, though unspectacular, Christmas. The slope of the improvement curve steepened in mid May as retailers went from “happy talk” to actually placing orders. Unfortunately we then hit July and August during which hiring slows down while hiring managers go on vacation and everybody (me too) is a little more focused on “outside activities.” A lot of the searches that we started in late May and June slowed to a crawl during July and will be finalized in the next couple of weeks. If we were publishing two or three weeks from now you would see a much bigger list of Toyjobs Success Stories (or you can just check back next month). Summer doldrums generally continue through the first half of August while toy company executives stare at their phones and pray that they don’t ring with purchase order cancellations. When they start breathing again about the third week of August, they suddenly seem to realize that the Fall Toy Preview is upon us and they better get moving if they want their team in place for the 2012 selling season. This year they didn’t all wait until late August. Toyjobs saw a surge in search starts at the beginning of August. Those searches are being worked now and will likely be filled in September/October. I foresee continued strength in search starts in late August and September. Why? Because that’s the usual seasonal pattern. Let me curb my enthusiasm by saying that we are nowhere near back to normal again but we are in so much better shape than we were two years ago and things seem to be getting better faster.

So, if you’re out of work, make the day after Labor Day the time when you renew your efforts to reach out to your network. If you’re working but would like to change jobs, now is the time to dust off your resume and tweak it up a bit. If you’re a hiring manager, think about how you can shorten your “decision cycle” and “pull the trigger” quicker. Otherwise one of your competitors might hire the person you want.

Muddling through more confidently,
Tom Keoughan

By | August 23rd, 2011|ToyJobs Blog|Comments Off on Toyjobs Sees Surge in Search Starts

The Toyjobs Annual Review and Forecast 2011

Retail sales jumped out of the box quickly in November and overall holiday sales were strong despite a slowdown in late December. The International Council of Shopping Centers said that its index for November and December was up 4 per cent over last year, the most robust growth in the holiday shopping season since 2006. According to MasterCard SpendingPulse US retail sales, excluding automobiles, rose 5.5 per cent between November 5th and December 24th. Online sales grew 12 per cent to $32.6 billion, the highest total ever, according to tracking firm ComScore Inc.

While the big blizzard and rainstorms in California appeared to take a late month toll many retail analysts said the real culprit behind the weaker December sales was an avalanche of aggressive promotions in November. These deals pulled sales forward and raised unrealistic expectations about consumer spending for the rest of the year. In addition, promotional discounting was so deep that it affected retail profitability. Of course, we still don’t have the numbers for January gift card redemptions. Gift cards are particularly profitable because consumers tend to spend a bit more than the value of the card. Also 20-30 per cent of gift cards never get redeemed at all, making them the retail version of “printing money”.

So, in any case, after a fairly strong holiday sales season much of the toy industry sporting tender holiday heads, hopped on planes bound for the Hong Kong Toy and Games Fair. As I talk to senior toy executives what I am hearing is that US retailer attendance continues to grow lighter but international buyers have been upbeat. In the US, retailers overbought a little in 2010 and are now more cautious but not overly so. Manufacturers are pleased that Wal-Mart is expanding its toy aisle again, at least during the holiday shopping season.

The biggest discussion is about the continuing rise in production costs. China has a serious inflation problem and the authorities have been trying, mostly unsuccessfully, to repeatedly tap the brakes. Raw material costs are rising and the yuan is strengthening. Add to that a nearly 20 per cent hike in the Dongguan minimum wage and constant rumors that many workers will not return to southern factories after the Chinese New Year. Chinese authorities have been trying to push low-end labor intensive manufacturing to the north and west. Inexperienced factories and inexperienced workers will naturally lead to heightened quality problems. Add to this, that shipping back to the coast on overcrowded roads (such as they are) is bound to slow things down. Despite this I expect retailers to continue to confirm orders later and later leaving manufacturers with impossible to meet lead times. The big question is will they allow manufacturers to pass through rising costs by increasing their holy price points.

This is all, however, against a backdrop of an economy that is clearly gaining momentum. Private sector employers added 297,000 jobs in December. The gain over the November numbers was the largest in the reports 10 year history. Outplacement firm Challenger, Gray and Christmas, said that layoffs in 2010 were the lowest since 1997. The unemployment rate in December dropped from 9.8 per cent to 9.4 per cent and while some economists voiced disappointment, they seem to have forgotten that most companies operate on budgets. In late 2009, when 2010 budgets were being drawn up, many companies were still worried that the world was coming to an end. 2011 budgets put together in late 2010 seem to reflect that companies are “cautious but comfortable”. All eyes should be firmly focused on the January – April employment numbers.

Anecdotally, Toyjobs saw search starts pick up since late October. Companies were telling us “find people now that we can start in January when we have the budget”. Since January 3rd we have seen a huge surge in search starts. This isn’t yet reflected on our job board because we tend to post searches toward the end of our work on them in order to keep LRWRB (Lonely Recruiters Without Repeat Business) at bay. I believe we will see this surge moderate as we move into the May/June time frame because it represents pent up demand just waiting for a flip of the calendar page to make budgets available. That said, I do think that hiring will continue to be much stronger than last year but it won’t be wholesale hiring. It will be companies filling necessary positions that were previously left open due to a mixture of fear and budgetary constraints.

On the road (or maybe “in the road”) leading to Toy Fair I have been flipping through the trade press and perusing new products. I regret to announce that Toyjobs has to once again present it’s much avoided “You’ve Gotta Be Kidding Me Award”

Wild Creations introduces Poo in a Box. Yes, really. This nutrient-rich animal dung comes from an elephant, reindeer, or rhinoceros. From the Natural History Museum, the Poo in a Box begins at a British zoo or safari park and is treated to be germ and odor free. Kids can sow the seeds, water the cardboard box, and watch the plants grow. Poo in a Box comes in three styles. Elephant poo with Christmas tree seeds, Reindeer poo with rose seed or Rhino poo with a banana tree seed.

Toyjobs predicts, that if this product sells well, the nation’s schoolyards will see a lot of tiny tears wearing pigtails in the coming year.

After the not so secret stealth fighter, the Gates trip to China and Hu Jintao’s visit to the United States; our China Report (and I’m sure you too) have been inundated with a flood of articles on China. In a not entirely successful attempt to stick a thumb in the dyke of this flood of information we have tried to focus on content that is: the most important stuff, more analysis than news reportage and is from unique sources that many of your may not regularly peruse.

Lastly, I would like to say, personally: Kudos for Neil Friedman. Mr. Friedman has been one of those rare combinations of savvy toy executive, a strong manager and an all around great guy who treated everyone he dealt with fairly and with respect. He’s fun too! I know that I join everyone in the toy industry in greedily hoping that Neil won’t be hanging up his cleats and will pop up somewhere else soon – hopefully leading a small to medium sized company where it can all be fun again.

I look forward to seeing everybody in February. There will surely be snow.

Tom Keoughan

P.S. For those in the know: Infomercial Dave – what’s he selling Snuggies or slapchoppers? Just a further revelation of his Huckster’s Heart.

By | January 25th, 2011|ToyJobs Blog|Comments Off on The Toyjobs Annual Review and Forecast 2011

Retail Zombies and Statistical Aberrations

The Human herds were out in droves like something out of a cheap zombie flick as the Thanksgiving weekend kicked off the holiday shopping season. Although the lack of “door buster deaths” could be considered a negative indicator; retail chains reported strong customer traffic and increased per capita spending. According to the National Retail Federation, the average shopper spent $365.34, up 6.4% over last year. Weekend web and Cyber Monday web sales also set new records.

After several years of relative thrift shoppers may be parting with their money more willingly simply due to pent-up demand which retail analysts have been calling “frugality fatigue.” That said, consumers have been trained to only shop for bargains. We may see the Thanksgiving weekend spike fade as shoppers wait to see if retail prices come down before buying, leading to a second spike right before Christmas. Let’s just hope that everyone buys more Dance Star Mickey’s and Squinkies than they do iPads and Microsoft Kinect Systems.

The toy industry is expected to have a solid up year and that should translate into increased toy industry hiring for 2011. Most observers were surprised by the increase, from 9.6% to 9.8%, in November’s unemployment rate and several economists have called it a statistical aberration after the positive jobs trends of September and October. It seems that after seeing the strengthening employment environment many people previously too discouraged to even bother looking for work – “entered the job market” therefore driving the percentage of unemployed job seekers even higher. However, if you look at a wider variety of indicators, the overall trend continues to show steady, if unimpressive, improvement.

Hours worked and wages have been rising (although they were flat in November). Both measures tend to foreshadow future job growth. As we have seen, consumer spending is up. Third quarter results from Visa, Mastercard and American Express showed US consumers spending approximately 13 per cent more than last year. Consumer sentiment rose in November to its highest level since June. November Job postings on Monster were up 22%. Lastly, the government revised jobs data for September and October to show stronger numbers than previously reported. It would not be surprising to see November’s numbers revised upward as well.

Anecdotally, here to Toyjobs, we have seen search starts pick up sharply beginning in the second half of October. My impression is that coming out of the depths of 2009, few companies budgeted for much, if any, hiring during the current year. When they found themselves in need of people they would start to look, they would interview, but would then find some way to postpone actual hiring. Now that the economy has stabilized and is growing albeit very slowly – they are looking to shore up their rosters and have that in their budgets for 2011. That does not mean that I foresee a wave of wholesale hiring but rather that companies are now looking to fill the holes that in 2010 they left vacant. This is the employer version of pent-up demand.

The US economy is firing on more (but still not all) cylinders and the recovery is just beginning to pick up steam. That said, there’s still a chance that it could disrail as many employers remain cautious about hiring due to the uncertainty over taxes, new health care and environmental laws, etc. Nancy Pelosi and Harry Reid appear to be oblivious to the “shellacking” they took in the recent elections. Fortunately most of the Democrats and President Obama (despite what he says publicly) seem to get it. It looks like in the next week or so we will see a compromise bill passed which will forestall any and all tax increases for a period of two years. Unless Congress acts, tens of millions of people could see their withholding taxes go up in January. That could dampen household spending and further weaken employment and the fragile recovery.

In the interests of full disclosure, I am an independent who has voted Democrat more often than not. I generally (but not always) admire Democrat’s social goals but often find myself concerned about the unintended consequences of their proposed actions. With the economy at a tipping point this is no time to be raising any kind of taxes on anything and definitely no time for continued uncertainty. If you’re going to make those kinds of changes, do it during “good times” so that the system can better absorb them. Once we get the economy steadily growing again, tax revenues will rise and it will be easier to attack the deficit. If you can get rid of all the agendas, dogma and histrionics (fat chance!) it pretty much becomes common sense – Econ 101. I’m going to shut my mouth now, before I get into any more trouble.

Muddling through,

Tom Keoughan

 

P.S. Sorry, I just couldn’t help myself from taking one last stir at the pot. In the last couple of weeks, Isaac Larian of MGA Entertainment had publicly accused the Toy Industry Association of being prejudiced against him and his firm. While I can’t speak either for or about TIA or MGA; I’m not sure that prejudice is always such a bad thing. I oftentimes find myself biased against working with nasty, unethical people and/or the companies they control. Is that wrong? I don’t think so.

By | December 8th, 2010|ToyJobs Blog|Comments Off on Retail Zombies and Statistical Aberrations

From the Yuan Wars to Toy Company Jobs

As November’s very heated election approaches in a continuing climate of economic malaise, desperate politicians are pointing the finger of blame anywhere and everywhere but at themselves.  The nation is rightly disgusted with its banksters but is growing immune to the long and continuous public bludgeonings of their ilk.  In search of another scapegoat the thundering congressional herd lurches eastward – “Blame the Chinese! – after all they don’t vote in our elections.”

Chinese workers have been striking (or just not showing up) and demanding higher wages.  Frankly, good for them – they were being paid a pittance and many had pretty lousy living conditions.  I’m all for an increase in the purchasing power of Chinese factory workers.  That said, a dramatic upward currency revision, as many in Washington are calling for, could have all sorts of unintended consequences.

China is NOT sucking up as many U.S. jobs as is touted by the pandering vote grubbers.  Low end (toys, sneakers, small appliances, et al.)  manufacturing left our shores long ago and is not coming back.  You can’t make these goods in the U.S. and still meet “the Wal-Mart price”.  Even in these dire economic times no one will accept a wage low enough to make widespread U.S. consumer goods production feasible.  Well, except maybe in Detroit.  “What about cars?” you ask.  “Building cars isn’t low end manufacturing.”  Yes, they are building cars in China but they are not shipping them here.  Those cars are for Asian consumption.  By the way, part of “they” is “us”.  U.S. auto manufacturers are building cars in China for Asian consumption as well.

If the U.S. political class is able to harangue China into a significant upward revision of their currency, it will cost U.S. jobs.  American companies who have their products manufactured in China will have higher costs, and because it is very difficult to budge retailer’s price points, will therefore have smaller margins.  An environment of diminishing margins is not likely to spur additional hiring.  Companies will not be looking for additional sales marketing or product development staff.  This is especially true of smaller private companies where owners tend to view the cost of each additional employee as coming straight off the bottom line – which translates to straight out of their pockets.  A rising yuan doesn’t support these small businesses which are supposed to be the engines of American job growth.

In taking a country from the 12th century to the 22nd in the span of a mere fifty years, China’s leaders have to deal with far bigger problems than the U.S. Congress.  They are going to move slowly and do what they think is right for them – whether what they think is right, actually is right or not.  Them, of course, being the Communist Party, which is committed to maintaining power whether the country is communist or not.  What we will likely see is a few small gestures such as the past two weeks 1% rise in the yuan in an attempt to mollify the situation until after the U.S. elections (now only six weeks away) when everyone’s attention will be focused elsewhere.

One of the factors that is really holding up job growth in the U.S. is uncertainty.  Business owners like predictability.  They determine what profit margin they want in order to make an enterprise worthwhile.  Then they try to project sales (always tricky) and try to set costs at a level that will give them that margin or better.  Costs are supposed to be the easy side of the equation to figure out.  Unfortunately, we are currently in a situation where no one knows what health care costs will be or what climate change legislation costs will be.  No one even knows what the tax rate will be.  The tide may turn either for or against the business community but once we know what the rules are we can decide what to do about them.  Until we know the costs we can’t even do the calculations, therefore many things are being put on hold . . . like hiring.

In the current economic climate it’s time to scrap blindly chanting ideology and focus on the pragmatic.  Just so you know where this is coming from – I consider myself socially liberal and fiscally conservative but most of all a pragmatist.  “People can believe in whatever they want, I want to do what works.”  I know, I just painted a huge target on my back and expect to be pelted from all sides by Nerf missiles when I arrive in Dallas for the Fall Toy Preview.  In any case, what seems to be pragmatic in that it would help the economy and can also actually be passed and signed into law is to extend all Bush tax cuts for a period of two years and then review them two years on.  This is not the time for a 700 billion tax increase.  I think it’s likely that is what will happen.  Obama doesn’t have the votes to do what he wants and everybody realizes it will be disastrous if taxes increase for everyone at the end of 2010.

Upcoming tax certainty isn’t the only positive as the economy continues to slowly (very slowly) improve.  There are other “reasons to be cheerful”.  Despite the hot summer doldrums, retail sales for July and August slowly but steadily increased, coming in ahead of expectations.  August saw an acceleration in manufacturing in both the U.S. and China.  Growth was slow but again it was positive.  However, we should temper our enthusiasm on this particular metric.  It is completely natural for production to ramp up in July and August as seasonal goods are manufactured for late August/September pre-holiday delivery to retailers.  While sell in is good, the ultimate question is sell through.

Average hourly earnings – which decide how much money people have available to spend – were up by 0.3 percent.  There was also a rise in temporary employment which is often a prelude to the creation of permanent jobs.  A better than expected 67,000 private sector jobs were added in August and there were upward revisions to data for the previous two months.  True, the government shed 114,000 temporary Census workers but that was expected.

The September stock market has been strong and most economists are de-emphasizing the chance of a double dip recession.  Warren Buffett last week stated:  “I am a huge bull on this country.  We will not have a double-dip recession.  I see our businesses coming back almost all across the board.”  After all the gloom and doom of the summer it seems that we find ourselves in a situation where the economy is not collapsing but rather heading in the right direction though at too slow a pace to drive unemployment down.

The toy industry has several things going for it.  Most toy companies have focused this year on producing low cost goods.  While retail sales have been creeping upward, shoppers have been hesitant to purchase big-ticket items like autos, furniture, appliances. In fact, electronics retailers are revamping their aisles to focus on handheld gadgets to try to excite consumers who have grown weary of their traditional big-sellers:  televisions and personal computers.  After all, how many big-screen TV’s do you need?  Handheld devices are still pricey compared to toys.  The toy industry may find itself in the pricing sweet spot for the 2010 holiday season.

The growth of Toys’R’Us pop up stores is also exciting.  Last year Wal-Mart only had to deal with the competitive impact of 90 somewhat hastily assembled Toys’R’Us Express locations.  This year Toys’R’Us is planning 600 express stores with 300 of the locations already up and operating.  More locations, more shelves to fill and more competition for a Wal-Mart whose toy department will be 25% smaller this year, are all positives for toy companies.

As for toy company jobs, the annual late August/September hiring bounce has been somewhat muted for a number of reasons.  Retailers continue to order late in an attempt to shift as much liability as possible onto toy manufacturers.  The trouble is that factories have been relocating inland and north.  It takes longer to get goods to the coast, there has been a shortage of shipping containers and also massive traffic jams on roads leading to the ports.  Later ordering combined with longer lead times is not a recipe for success.  Over my three decades in the business, I have noticed that toy companies feel better about themselves and start hiring once their goods hit the retailer’s loading docks.  Later shipping has caused many companies to delay pulling the trigger on hiring decisions.  Also, all of the uncertainty over government rules, regulations and taxes has been a considerable factor.  Make no mistake about it some companies have begun hiring and we have begun a number of searches, but there are also a lot of companies talking about their staffing needs but dragging their feet rather than getting going.  Like the economy, things are moving in the right direction but slowly, slowly.

Still Muddling Thru,

Tom Keoughan

P.S.  Wow, sorry about the long tirade.  There must have been some “pent up demand”.  I guess the main difference between me and the Washington gasbags is that I have not yet learned how to talk in bullet points.  See y’all in Dallas.

By | September 22nd, 2010|ToyJobs Blog|Comments Off on From the Yuan Wars to Toy Company Jobs

‘Tis the Season for Statistical Confusion

It’s time again for the annual swirl of confusing numbers emanating from retailers and Wall Street’s retail analysts.  Retail traffic was up on “Black Friday” and the post holiday weekend, but the average consumer spent less, an average of $347 down from $360 a year ago.  Surveys showed that the average person had completed 36% of their holiday shopping which is equivalent to last year.  All this seems to indicate that this year we had a better gauge due to a larger statistical sample which seemed to show that consumers will be spending less this Christmas.

But all the hype and hoopla which surrounds the day after Thanksgiving exaggerates the extent to which it predicts total holiday sales.  There are plenty of people, like me, who wouldn’t be caught dead anywhere near any retail establishment (with the possible exception of the wine shop) at any time during the entire weekend.  “Black Friday” and the following weekend are the shotgun start to the high shopping season – not a predictive bellwether. 

Here’s where things get really confusing.  If you look at the following chart, it’s easy to see that total November sales were very strong.  Unfortunately, comparisons are difficult.  There was an extra “shopping week” at the end of November which skewed total sales numbers higher and that extra “shopping week” will be lost when we examine December sales.  Also both store traffic and sales volume dropped off after Thanksgiving weekend.  We should also consider that due to the long “indian summer”, throughout much of the nation, that a significant portion of the spending went toward warmer clothing.

Bargain-Hunting Season  
Retail sales for November 2007  
 

Total November sales

 
Discounters

In millions

Chg. From year ago

Comparable stores chg. from year ago

Wal-Mart*

$31,718.0

+8.4%

+1.5%

Target

5,972.0

+16.7

+10.8

Costco**

5,720.0

+13.0

+6.0

Department Stores   
Macy’s

2,713.0

+13.9%

+13.4%

Kohls

2,023.2

+20.0

+10.2

J.C. Penney***

1,709.0

+5.8

+2.6

Nordstrom

804.9

+7.4

+8.7

Dillard’s

559.3

+2.0

+1.0

Neiman Marcus

360.0

+8.7

+5.8

Saks

347.6

+26.3

+25.7

Apparel   
TJX

1,800.0

+10.0%

+7.0

Gap

1,540.0

+11.0

0

Limited

858.7

-8.4

-7.0

Ann Taylor

209.2

+12.2

+3.9

Teen Apparel   
Abercrombie & Fitch

352.3

+25.0%

+2.0

American Eagle Outfitters

285.8

+16.0

0

Sources: the companies; WSJ Data Group  

  *Comparable sales for U.S. stores only, excluding fuel sales

 **Comparable sales for U.S. stores only

***Department stores only

What people are buying is of particular concern to toy manufacturers.  There were an awful lot of “Guitar Hero” games and Nintendo Wii’s (do we count those as toys?) moving out the doors.  Generally consumers seemed to be focused on AWAP (Anything with a Plug).  There doesn’t seem to be any “gotta have it” product driving people into the toy aisles this year and that controversial last minute Ecology Center study trumpeting that over one third of toys contained dangerous chemicals certainly didn’t help.

So where does all this leave us.  It seems that thus far, total holidays sales appear to be strong BUT a larger percentage than normal of total holiday sales has been counted.  Sales seem to be slowing BUT we still have the two crazy final weeks of holiday shopping to go.  I think its best to cross your fingers, close your eyes and hold on tight.  There’s not much we can do about it now and soon enough we’ll find out where we’re heading.

Happy Holidays!

Tom Keoughan

By | December 10th, 2007|ToyJobs Blog|Comments Off on ‘Tis the Season for Statistical Confusion

A “Confusement” of Numbers

A plethora of inaccurate or ill conceived numbers are contributing to what our dear President might refer to as “confusement” about the recent holiday selling season. Holiday sales have been categorized as soft with average same store sales increases at about 2.5 percent. Retailers and Wall Street analysts had apparently emailed Santa a wish list indicating that they wanted 6-7 percent. Anything less would be deemed disappointing. Where do they get these numbers? Has the population increased 6-7 percent in the last year? Have earnings of the average family shot up 6-7 percent? Have their savings? With most of the real estate refinancing already done and consumers unable to use their homes as ATM machines, just where was that 6-7 percent supposed to come from?

Of course, while the above analysis seems to make sense and may be somewhat entertaining, it is completely unsound. Our overconsuming society is over-retailed. Not only do retailers compete against each other, but they cannibalize their own same store sales by plunking down yet another supercenter only five miles away from the last one. The real story of Holiday sales is quite different when you look at more appropriate numbers. Walmart’s (oh, such a terrible year) total December sales were up 8.8 percent year on year. Target was up 9.9 percent, Costco plus 14 percent, Kohls 11.2 percent, Dollar General up 12.1 percent and so on. Numbers like that don’t sound disappointing at all. It’s all about looking at the most appropriate numbers. Unfortunately, the most appropriate numbers are not always easy to come by. My personal favorite is the game of “we sold a lot of gift cards and we can’t count them until they’re redeemed.” I understand that from an accounting standpoint you can’t count them until they’re redeemed, but how many dollars in gift cards did you sell? You don’t know? Gee, I’ll bet your POS system can tell you exactly how many dollars in gift cards you sold. What you don’t know is how many will be redeemed. Apparently 20-30 percent of gift cards are never turned in. Free money – now that’s a business I like. I’ll sell you 70 cents for a dollar all day long. And hey, when does that 20-30 percent get counted? 

So the overall holiday sales figures weren’t so bad after all. However, retail margins were likely to be razor thin. Walmart was discounting toys before even Halloween. I saw big flat screen TV’s being sold for $1,000 – $1,500 dollars off – and they were selling a lot of them. Hell, I even bought one myself. Lord knows the retailers aren’t about to eat those discounts on their own. They’ll be looking for markdown money. That should be infuriating because retailers weren’t closing out unsold merchandise. They were discounting starting in October as part of a marketing strategy to drive store foot traffic. 

While at first blush the toy industry appeared to have a good year, we have to tease out the video game numbers. With several new game platforms and Nintendo’s hot product, video game sales rose 18% to $13.5 billion. Now the numbers get a bit foggier. What seems clear, or at least unclear, is that the toy business did much better than the previous two years’ 4-5 percent annual decline.

Why is it so difficult to just get the straight numbers in a timely fashion? Wall Street analysts and research firms devise all these numbers, indicators, formulas, etc. Many of them, although they seem to make sense, are ill conceived or misleading. The numbers are then slowly dribbled out over time. These numbers are used by investors from hedge funds and pension managers to Ma and Pa Kettle to make buy and sell decisions. More different numbers dribbled out over a greater length of time leads to more buy and sell decisions. Wall Street clearing houses make money on every incremental trade. Now there’s a business I’d like to be in too. Alas, too many numbers. 

That leaves me stuck in the recruiting business.  Even though it’s a lot more work than selling 70 cents for a dollar (sigh), Toyjobs had its second best year out of twenty-five in 2006.  Just don’t ask me to tell you our numbers.  

See ya’ at the Toy Show, 

Tom Keoughan

By | January 30th, 2007|ToyJobs Blog|Comments Off on A “Confusement” of Numbers

The Consumer Electronics Store that Stole Christmas

In what looks like a repeat of last year, the toy industry’s big challenge this year appears to be the consumer electronics business.  All indicators are that consumers will be torqueing their credit cards on wide screen TVs and DVD players.  There is also the launch of next generation video game platforms.  With “Bobby” getting a $500 Sony PlayStation 3 along with a small stack of video games/accessories, and Dad buying a mammoth flat screen TV “for the family” (even though it seems to only be able to tune in football games and golf); chances are there’ll be a lot less toys under the tree this year; especially when you factor in hundred pound fruitcakes and embarrassing holiday sweaters.

On the bright side, Christmas 2007 will not have new video game platforms launched and two years worth of widescreen TV demand will already have been satiated. 

MGA’s pending purchase of Little Tikes should be interesting to watch.  We have no doubt that Isaac Larian will take great glee in trying to poke Mattel’s Fisher Price unit in the eye.  Fisher-Price, however, is a colossus.  Its brand recognition, product line and execution are all very strong.  Mattel President Neil Friedman knows exactly how to manage this business although it is possible that he may be distracted while trying to rescue Barbie and the rest of Mattel’s El Segundo operation.  MGA doesn’t have a lot of experience running its own manufacturing plants.  The bulk toy business means lots of expensive plastics, resins and transportation.  Manufacturing plants also mean lots of employees to manage–never an MGA strong suit.  This being said, there is plenty of fixing up that can be done.  Little Tikes and indeed all of Newell Rubbermaid’s operations were put into a downward spiral due to the disastrous management policies of fired CEO, Joseph Galli. 

Over at Mattel, Neil Friedman has the Fisher-Price division in very strong shape – strong brand recognition, strong new products and strong execution.  The new TMX Elmo looks to be a runaway hit and the Kid Tough Digital Camera looks very strong.  Hopefully, Friedman can work his magic on Mattel’s El Segundo operation for 2007.  This year’s El Segundo product line isn’t his and previous “leadership” has left him with such apparent boondoggles as – “Tanner” – The Defecating Dog!…He Eats, He Poops!” What were they thinking?  Seven year old boys are going to love this and little sisters everywhere are going to be repeatedly tortured.  Also, in stores now – Botox Barbie!  Stick your finger in her back and watch her face…you just really have to see it for yourself.  Products like these are like landmines left for new management by the Bousquette team as they were chased from the building. 

Finally, noted jackasses Charles Schumer and Lindsay Graham delayed action on a bill to levy a 27.5% tariff on all Chinese made goods.  Do these idiots have any idea how many thousands of US owned businesses design, market and sell products that they have contract manufactured in China?  The Schumer-Graham bill would gut their profit margins (you can bet Walmart isn’t going to move its precious price points) and drive many, if not most, of these companies out of business.  If anything gives China an unfair advantage in world markets it’s the fencepost level stupidity of America’s lawmakers.  Somebody ought to vote these geniuses out of office…and fast. 

One also wonders if there is anyone even slightly awake at the TIA.  Do they have a lobbying effort on this?  Has anyone heard about it?…didn’t think so. 

See you at the October show, 

Tom Keoughan

By | October 3rd, 2006|ToyJobs Blog|Comments Off on The Consumer Electronics Store that Stole Christmas

Toy Industry Hiring Remains Robust Despite Icy Showrooms

Toyjobs had its third best year out of twenty-five in 2005.  It easily could have been the second best, but a few placements spilled over into early January.  We continue to see robust toy industry hiring for the year ahead.  Our continuing forecast is that during the 2001-2003 economic slowdown, companies cut back more than fat, they cut muscle and bone.  The economy rebounded in 2004, which helped all sorts of businesses, but the toy industry to a much lesser extent.  The reason for this is that it’s not the consumer who is the toy industry’s nemesis, but rather our “partner” the retailer.  I could go on a whole long tirade as to the “why’s” and “wherefore’s” of this as I’m sure you could, but I’ll spare us both and give you the “long story short” version.

In using toys as loss leaders in order to drive traffic, major retailers’ constantly demand “new” product, delivered on shorter lead times at cheaper prices and at lower margins.  They also increasingly want the product to be customized AND they like to make lots of picayune changes, especially late in the day.  This leads to all sorts of frenetic activity and requires more people to get it done.  Business is certainly not great and companies don’t really want to be hiring, but they need a couple of extra hands just to get the work done.

In the “business is certainly not great” department, while the overall holiday shopping season was a success, it was heavily skewed toward high ticket items and luxury goods.  This can set up a scenario where even though total holiday spending rises, money spent on toys decreases.  With such a large portion of holiday budgets being spent on flat screen TVs, iPods and XBoxes, there is a much smaller portion left over for less expensive items like toys.

I wouldn’t hold my breath waiting for all those gift cards to be redeemed either.  Most gift cards are redeemed within six to eight weeks when some of the heaviest post holiday discounting occurs, and it’s no mystery whose margins those discounts are coming out of.  Also, although gift cards may be the perfect present for fickle teenagers or young adults, I really can’t imagine giving a “toy age” kid (2-8 years old) a gift card to open on Christmas morning.  It sort of takes the mystery and joy out of the whole thing.  Not to mention that the best present for the gift giver is seeing the excitement in their little faces.

All this talk of retail brings us to the Tom Coughlin–Walmart saga.  Former Walmart Vice Chairman Coughlin has pleaded guilty to wire fraud and tax evasion charges in connection with the misappropriation of between $350,000 and $500,000 from Walmart through fraudulent expense reimbursements and improper use of gift cards (so that’s where all those gift cards went).

The most explosive aspect of the case thus far remains unresolved.  Mr. Coughlin has claimed that he was reimbursing himself for a secret scheme to fund an antiunion spy operation.  Many of Walmart’s antiunion activities are well known and it has been quite amusing to hear Walmart repeatedly state something on the order of “We have not found any evidence that we, Walmart were involved in any such scheme.”  Well, duh.  The FBI thus far has also not uncovered any evidence that there was any clandestine intelligence operation directed at unions, but it remains unclear whether Coughlin has cooperated with the FBI on that investigation or is making the whole thing up or is saving ammunition for the civil suit in which Walmart is trying to strip him of over $10 million in retirement benefits.  A case in which Walmart is not doing too well, at least so far.

My personal favorite part of the case is Mr. Coughlin’s visit to a Walmart store where he spent $1,000 in gift cards to purchase three 12-gauge shotguns, Stolichnaya vodka, a large Polish sausage and a Celine Dion CD.  Sounds like a big night in the Arkansas hills.  The Celine Dion CD has got to be a bit of an embarrassment, though.

Closer to home, the 2006 Fall Toy Show has been set for the Javits Center, home of the hardest floors on the face of the earth.  This will necessitate that toy companies build custom curtained booths since no one is likely to put their product on a table display where anybody with a camera phone and an Asian manufacturing contact can knock them off in three weeks.  While this has been billed as a temporary measure, it has raised suspicions that the TIA will have an easier time selling Javits as a permanent solution once everyone has paid to have those booths made.

The imminent February Toy Fair has been threatened by the current Toy Building ownership talking about cutting off heat and electricity to individual showrooms.  One way to shine some light on this very nasty business is to remember that Toy Fair used to be a big media event.  It might be a good idea to work the phones and drum up a strong media presence.  When they arrive to see all the hot new toys and find a major trade show operating at icy February temperatures, it should generate a lot of coverage.

I look forward to seeing you there–with long johns on.

All the best,
Tom Keoughan

By | January 23rd, 2006|ToyJobs Blog|Comments Off on Toy Industry Hiring Remains Robust Despite Icy Showrooms

Holiday Cheer…Well, Kinda…

Holiday shopping is in full gear and retail sales comparisons over last year seem reasonably strong, but I’m not sure that means glad tidings for the toy industry.  There seems to be a lot of consumer electronics and winter clothing going out those retail doors.  Flat screen TV’s (seemingly the “gift du jour”) are very high ticket items which skew retail dollar volume higher, but probably mean less individual items purchased, thus creating the illusion of an overall strong sales season – when in fact it really means just a very strong sales season for Samsung, Sharp and Sony.

On a smaller scale, this phenomena directly affects the toy industry when you look at the number of Xbox’s sold.  If you’re a kid getting an Xbox and a couple of games to go with it, you’re not likely to be receiving a lot of other toys once you factor in clothes, that you really don’t want, and embarrassing seasonal sweaters.

As I gaze into my crystal ball (admittedly a very cloudy crystal ball), I see toy sales for the year being flat to slightly down.  With margins being tight due to oil and resin prices, transportation costs, etc. etc. etc.; it looks to be a difficult but not terrible year.

The toy industry, like everyone else, is going to have to wait for oil prices to come down before it can begin to breathe a little easier.  Once oil prices do ease, watch out for Walmart and its brethren trying to squeeze manufacturers and capture the cost differential for themselves: “You worked on smaller margins last year; you should be able to work on smaller margins now.”

In this month’s China Report, be sure to read Why China Stands to Grow Old Before It Grows Rich, a fascinating look at what population demographics may mean for China’s future that draws some surprising conclusions.  If you are interested in reading the whole report, The Graying of the Middle Kingdom, shoot us an e-mail and we will forward it to you.

Lastly, during the layoff years of late 2000 through early 2004 and the subsequent housing boom, a lot of people have either moved or moved on and we have lost track of them.  Our Missing Person’s page has typically averaged about ten people that we are trying to track down but has recently swelled to several dozen.  Please check the list as you run into people during the holiday season (or during that long January 2nd plane ride to Hong Kong) and let us know where to find them.  Toy companies are now in full hiring mode and we have lots of job opportunities.  What better gift to give to a friend or colleague than helping them take the next step in their career?

Seasons greetings to you and your families,

Tom Keoughan

By | December 14th, 2005|ToyJobs Blog|Comments Off on Holiday Cheer…Well, Kinda…