Target

Two toy fairs occurred in February of 2005.  At the Javits Toy Fair, most of the specialty manufacturers were very upbeat as some long absent retailers returned to sacrifice their feet to the world’s hardest floors.  Just as importantly, manufacturers were writing orders.  The majority of company presidents that I spoke with wrote enough business to more than pay for the show.

Back at the Toy Building (for now) there was mostly grousing along the lines of “what are we even doing here.  None of the majors are here.”  Upon closer questioning, however, it did turn out that most companies’ schedules were pretty full.  I don’t know about you, but with such a large percentage of the business being done by three or four majors at low profit margins, I’d be trying like hell to diversify my account base.  A company can live by Walmart one year but die by them the next.   With a well diversified account base (re: small, pesky accounts with higher margins) especially if you can sell them enough to cover your company SG&A, you can live to fight another day.  Also, although Walmart wasn’t at the show, some of the more aggressive manufacturers did make inroads by selling to Walmart.com.

What will become of the October and February Toy Fairs in the future?  There is so much rumor, insider gossip and white noise out there that at least at this point it’s safe to say that nobody really knows.  One thing we can all hope for is that we won’t have to schlep to Orlando – a completely artificial land made up entirely of bad food, plastic and foam.  I’ve lived my entire life without ever setting foot in Orlando and am not anxious to start now.  As for maintaining trade shows in Manhattan, I’m all for it – but it seems a shame that so much time and effort is being spent on a glimmer of a hope for a Toy Building over on the West Side which may be built by 2012, if New York gets the Olympics, or if there’s a new football stadium that no one needs, if, if, if…Such things are pipedreams and fiascos made of.  Manhattan supporters and the toy industry as a whole would be better supported by focusing this energy on finding a building that actually exists and isn’t in the middle of nowhere. 

Two of the major toy retailers had pretty good fourth quarters in 2004.  Target had strong same store sales growth while Walmart had 9% overall sales growth and a 16% profit surge.  Walmart’s same store sales were hurt by continuing to cannibalize their own sales by opening a flurry of new stores in the quarter.  Interestingly, Walmart’s CFO has at long last finally stated that the company should be judged by total sales and profits rather than same store comparisons.  Toys ‘R’ Us muddled along with a year that can best be described as “less bad.”  As for KB – gee, do we really still count KB?

In WALMART UNIONIZATION news it should come as no surprise that Walmart closed the Quebec store which had voted to unionize.  Walmart Canada spokesthingie Andrew Pelletier stated “we have been unable to reach an agreement with the union that in our view would allow the store to operate efficiently and profitably.”  No mention was made of how much Mr. Pelletier’s salary has cost the company or of how many productive employees might have been retained had Mr. Pelletier’s labors been judged on efficiency and profitability.  With regard to a second Quebec store whose employees are considering UNIONIZATION; the Quebec Government Labor Relations Board told Walmart Canada to stop intimidating employees who wished to unionize.  The Quebec Board apparently carries little weight in the great state of Colorado where Walmart successfully intimidated employees who had called for election into then voting down their opportunity to unionize. 

At Toys ‘R’ Us, The Dude and the board continue in their bungling ways.  It’s almost too incredible to believe that they thought they could sell off the sagging domestic toy division and then sneak off with the good stuff.  Apparently, they never considered that a sophisticated buyer might want to buy and hold Babies ‘R’ Us while disposing of the toy group and real estate to finance the deal.  This type of thing happens when you hire a very pretty tropical fish who believes, and then convinces you, that he can swim with the sharks.  Then again, the TRU share price has just about doubled so maybe he’s sharkier than he appears.

We applaud recent comments made by TRU toy group president John Barbour in which he calls for both greater innovation and less commodization in the toy business.  One can’t help but hope that he’s able to shake himself loose of The Dude and then walk the walk as well as get his computer jockeys (buyers) to do the same.  If he can pull it off, TRU and the toy industry as a whole just might stand a chance.

All the best,

Tom Keoughan