Toy Jobs

Toyjobs Prevails in Personal Fraud Suit vs. Ivars Sondors

The Superior Court of New Jersey has awarded Toyjobs a default  judgment in the amount of $39,456.00 in its personal fraud suit against former  A-HA Toys president Ivars Sondors.

Toyjobs president Tom Keoughan said: “I certainly expect  that Mr. Sondors will try to make it difficult to collect but we have chased  him for over three years across two continents. He should realize by now that  we’re not going away. The beautiful thing about a judgment obtained on a  Complaint for fraud is that it can’t be cleared through bankruptcy. It sticks  around and so shall we.”

By | December 7th, 2011|ToyJobs Blog|Comments Off on Toyjobs Prevails in Personal Fraud Suit vs. Ivars Sondors

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

Japanese Supply Chain and Oil Price Shocks Temporarily Slow Recovery

The May unemployment rate ticked up to 9.1% from 9% in April. Incongruously U6, Toyjobs’ favorite employment statistic (which includes part timers and consultants who would prefer full time work) dropped by a tenth of a percent to 15.8. These numbers are just snapshots in time and it’s better to view their trends over a number of months. Should there be a trend toward slower employment growth, I think it will be reversing at about the same time it becomes readily apparent.

First, we should note that government statistics are notoriously inaccurate and will be revised several times before finalized. We also saw an oil price spike which has now begun to abate. Let’s not forget enough seriously crazy weather (tornadoes in Massachusetts?) to make an “endtimer” sound almost rational. Next time you’re at the supermarket remember to stock up on locust repellent.

I think that a good portion of the May numbers can be explained by supply disruptions after the Japanese triple disaster (3/11) especially in the area of auto components. No parts has meant less hours, no hiring, furloughs and layoffs in the huge US auto manufacturing sector which had previously been growing. In April, US economic growth was 0% but if you back out auto manufacturing the number would have been .4% which annualizes to a strong 4.8% (anything over 3% is pretty good). Now we can’t just extrapolate forward like that with any degree of accuracy but ex-autos the US economy was growing at a healthy 4-5%.

It will take Japanese suppliers several months to get up and running at full tilt and unfortunately the period of reduced supply will coincide with the usual summer hiring slow down. In July and August as people work shorter weeks (how much work really gets done on summer Fridays?), take long weekends and extended vacations it becomes difficult to get job candidates interviewed by all the necessary people or even get everyone together in a room to make a decision.

Additional drags on the economy this summer will be the end of QE2 (basically the government buying scads of bonds in order to keep interest rates artificially low) and the end of the Obama stimulus plan (roadwork everywhere).

As a seasonal/cyclical business the toy industry is naturally just a little out of sync. In most of the economy, companies get new budgets in January leading to a jump in hiring. The toy industry is up to its eyeballs in trade shows until March so much of that employment pop waits until then. Toy industry hiring has markedly improved this year but in just the last three or four weeks I have seen an even stronger acceleration in search starts. For small and mid-sized toy companies it’s often not until mid-May that retailers move from “happy talk” and planogramming to actually locking in orders. As toy companies gain clarity in their business outlook they feel more comfortable adding staff that they already knew they needed but were holding off on.

Increased search starts in late May/early June. Should lead to increased hiring in late June and early July. Typically there is a weak patch in search starts during July and in the first half of August. Late in August toy companies seem to suddenly wake up to the fact that the new sales season will begin in October (really before that if you want to get appointments scheduled for the Fall Toy Preview). If they want to make changes to their sales team before that they have to move fast. The reality is that they’re already late to the chase and probably should have started these searches in late July/early August. This next spurt in the toy industry hiring coincides with what should be an improvement in economic and employment numbers for the economy at large as people return from summer vacations and the Japanese supply situation improves.

That’s the plan anyway. Absent tea leaves and chicken entrails it’s all I can offer for now. That forecast will surely change with new information and heightened brainpower the latter of which seems unlikely during the summer months. September certainly feels a long way off for autoworkers and the unemployed but this soft patch should be over quickly so keep on keepin’ on.

Muddling through,

Tom Keoughan

By | June 8th, 2011|ToyJobs Blog|Comments Off on Japanese Supply Chain and Oil Price Shocks Temporarily Slow Recovery

Toy Company Jobs……What Next?

Job growth was anemic in July due to large government job cuts.  There was job growth in the private sector but it was less than expected.  Businesses are waiting for consumers to start spending while consumers are waiting for companies to start hiring.  It reminds me of a junior high school dance – nobody wants to be the first to step out.

There are two things we should keep in mind.  First, all the journalistic doom and gloom keeps people’s eyes glued to the screen/page which helps sell TV, print and internet advertising.  The entertainment/news business has been going through its own protracted slump and they are pumping out the pessimism for all it’s worth.

Secondly, July and August are always slow when it comes to both retail sales and hiring.  People are on vacation, outside, at the pool or hiding in their air conditioned homes instead of skulking around retail outlets.  Companies have different people on vacation at different times and it is very difficult to get much interviewing or hiring done.  Hiring slows even more in the seasonal consumer goods business as companies wait until retailers receive their pre-holiday shipments before they pull the trigger on spending decisions.

Economic indicators have been mixed but the economy is NOT falling off a cliff.  That July employment statistics were weak really isn’t that surprising.  I would expect the August numbers to be unimpressive as well.  It won’t be until we get to the end of September and end of October numbers that we will have a clear vision of which direction the economy is headed.

Most toy companies are telling me that sales into retailers are up (sell through to consumers remains a question mark) but that there continues to be pressure on margins.  Labor costs are up and the yuan and material costs are up marginally.  Factories are trying to raise prices.

Our forecast remains that there will be an increase in toy industry hiring beginning in September and running through the end of the year.  I am a little more concerned than I was that we may need one more year to reach that point in the cycle but I am going to wait for end of September and October economic numbers before succumbing to pessimism.  While things certainly are not good they are already vastly better than last year.

You will likely notice that our Toyjobs postings are currently a little thin.  Partially that is due to a number of searches that we recently completed.  Additionally, we are currently in the gap right before shipments hit the retailers’ warehouses.  I can say that we’ve been having a number of constructive conversations with employers and I expect a fatter list of toy company jobs after Labor Day.  So, steady as she goes.  Keep manning the oars.  Things could go either way from here.  We’ll know in November.

All the best,

Tom Keoughan

P.S.  Toyjobs Executive Monthly will be switching over to a Constant Contact format with our next issue.  If you don’t wish to continue receiving this every six weeks or so this would be a good time to opt out.  Just send us an email with “unsubscribe” in the subject line and we’ll take care of it.

By | August 17th, 2010|ToyJobs Blog|Comments Off on Toy Company Jobs……What Next?

Feeling Better but Proceeding With Caution

The stock market has been racing ahead even as progress in the real economy has been much more muted.  The market, after all, runs on emotion in the short run and tends to look about six months ahead.  I’m as glad as anyone to see it go up but have the feeling that this is really just a rebalancing after having overshot to the downside.  In these financially perilous times it is prudent to rein in one’s “irrational exuberance”.

 

Meanwhile, back in the real economy, green shoots are heavily mixed with weeds. The consumer, who represents 70% of the U.S. economy, is broke.  Housing prices continue to decline, although at  a more gradual pace. People can no longer use their homes as ATM machines. Their 401Ks are down thirty to forty percent.  They have little or no savings and credit card limits are being cut.  At the same time, people are worried about their jobs.  The unemployment rate fell in July, dropping 0.1 percentage points to 9.4 percent. That still leaves us with U6 (a better picture of unemployment and underemployment) of 16.3 percent.  That means that one in nine Americans is unemployed, underemployed or for the time being has just given up looking for a job.  Another underpublicized number is that about a quarter of the improvement in job losses in July was due to government hiring.  In the private sector, companies are simply cutting heads more slowly.  Although the worst appears to be over that doesn’t mean that anything is getting better quickly.

 

With the consumer being so weak it should be no surprise that retail sales have continued to slide.  What about cash for clunkers you ask?  First of all, at best this is a one time boost.  It also represents a little sleight of hand for the government’s consumer spending numbers.  For example, I traded in a twenty year old Jeep that we only used off road and in the snow.  It could barely reach 50 mph and the floorboards were beginning to “Flintstone”.  I couldn’t have gotten a hundred dollars for that car.  I traded it in for a Subaru Outback.  Obama paid the $4,500 down payment and I got 0.0 percent financing over five years. Strangely the entire $24,000 cost of the car will be counted in the government’s August consumer spending numbers.  Wow.  I guess we should look for an artificial bump in consumer spending for August and September.

 

We should also consider a number of other problems which will loom large in the not too distant future.  One in eight U.S. households with mortgages is either in foreclosure or in arrears.  And there are even more mortgage resets coming in the next fifteen months than have happened to date.  Add to that mounting credit card losses and the coming commercial real estate debacle and it’s easy to see that we still have a long bumpy road ahead of us.

 

Despite all that, I am not a gloomster.  I would characterize myself as cautiously optimistic but a believer that things are going to take another year before they really get better.  Of course, I have no way of knowing that for sure.  Nobody does.  I can’t tell the future and neither can any of the talking heads you see on television.  What we do know is that someday somewhere in the future things will be better even if we don’t know when that will be.  What businesses and households can do is to look at the possible scenarios and budget in such a way that it is most likely that they will survive until better times are realized.

 

The different types of recovery that we are likely to see are: L, W, U or soup bowl, square root or V.  The L shaped scenario has only been seen once in U.S. history.  It is an extreme and if it happens again we won’t be worried about our budgets, we’ll be foraging for canned goods and bullets.  The government led by Ben “I’ll throw money from helicopters” Bernanke have promised to do everything in their power to avoid that grim future.  If it happens, there is little we can do about it outside of stockpiling krugerrands and Campbell’s soup.  So, let’s not even worry about that.

 

The W, U and square root models of recovery are the most likely scenarios while a V shaped one is unlikely for all of the reasons stated above.  Let’s start with the U shaped recovery (which I think is most likely, although that means very little).  In a U shaped recovery, after the roller coaster ride to the bottom that we saw in October 2008 and again in March of this year, there is a longer than usual period of no or slow growth before the economy begins to pick up again.  In this type of scenario businesses and households should budget very cautiously although not to the point of complete austerity.

 

With a W shaped recovery we would see a sharp upswing only to come crashing down again later before a real sustained recovery begins.  It’s important not to fall for a head fake like we could be currently seeing in the stock market but are yet to see in the actual economic data.  By budgeting for a U shaped recovery we are covering ourselves in case it really turns out to be a W and in fact can use the brief spike in the W to replenish cash reserves.

 

With a “square root” recovery, we again take that roller coaster ride to the bottom followed by more gradual growth rate.  Growth won’t be as rapid as a V shaped recovery but will begin far sooner than our U shaped model.  If we again budget for the U scenario, the downside is we maybe should have ramped up business investment a little sooner but on the upside we will have been sleeping at night.

 

What our back of the napkin game theory tells us is that although we really don’t know what the future looks like we can make intelligent budgeting choices which are likely to see us through until the economy improves.  Therefore, businesses, households and certainly Toyjobs should budget for a U shaped recovery and if things turn out to be better than that – great.

 

Whew.  Enough of that!  Obviously it’s been sitting and stewing in my head for quite a while and I feel much better now that it’s OUT!  Anecdotally, over just the last three or four weeks toy company hiring is beginning to get a little stronger.  The key words here are: “beginning” and “a little”.  Hiring is far from robust but it’s a lot better than the total job drought of the previous nine months.  As discussed above, businesses are “feeling” a little bit better about the future even if the actual economic numbers reveal only that things are no longer getting worse.  The seasonal nature of the toy industry impacts hiring as well.  Retailers confirm their orders later and later even as manufacturing and shipping cycles grow longer and longer.  More toy companies find that they don’t know how their year is going to turn out until July or August. That usually causes an increase in toy industry hiring from late August until the end of the year.  This time around, the usual August bump coincides with people generally feeling better about the economy at large so that this year I expect the usual trend to apply albeit on a more muted basis.  Unfortunately for job seekers in the toy industry, next year the usual seasonal hiring pattern will also apply.  I see toy industry hiring through the end of the year being better but not as strong as usual.

 

Toy companies will hit their reset button in January.  There will be continued uncertainty in the economy.  Retailers will continue to hold off on order confirmations until just after the last possible second.  My best guess is that we will see another year of weak (although not as bad as this year) toy industry hiring until we hit that early August time frame.  Then, as usual, it will improve.  How much will it improve?  It will depend on the real economy and real economy factors like:  unemployment, GDP growth, retail sales, etc.  I wish I could chart a clearer course but I’m smart enough to know that I’m not smart enough to tell the future.  That light at the end of the tunnel just might be an oncoming train.

 

Muddling thru,

Tom Keoughan

 

P.S.  Disney’s takeover of Marvel looks like a great strategic deal for Disney as it can drive Marvel’s product portfolio across all of its business platforms.  It will also have the opportunity to build Marvel’s myriad underdeveloped brands. Marvel’s shareholders make out well in receiving both cash and shares in a less volatile growth vehicle.  Although Disney paid full price (a 29% premium), in the longer term Disney shareholders should benefit by obtaining a strong strategic match that is large enough to move the earnings needle.  That said, there are some current licensing entanglements with rival studios that Disney may prefer not to have.  They will have to either wait them out or buy them out.  It appears that, aside from the usual backoffice consolidation, most Marvel employees will remain although that can always change over time.  Oh, in case you were worried about him, fear not, Ike Perlmutter makes out quite well as usual.  In addition to reaping a handy $600 million he will become Disney’s second largest shareholder, just behind the equally cuddly Steve Jobs.

 

P.P.S. (Driving the admins crazy!) Our final China Report Article – “The Yin and Yang of U.S. – China Relations” is pretty much a must read.

 

Have a great holiday weekend!!

By | August 1st, 2009|ToyJobs Blog|Comments Off on Feeling Better but Proceeding With Caution

“Less Bad” is the “New Normal”

Clichés spring like “green shoots” from the mouths of journalists, TV talking heads and mush mouthed politicos.  The media seems to have abandoned its age old “bad news sells” model with the sudden realization that too much bad news may put them out of business.  They have joined with beltway types to try to talk up consumer confidence in the hopes that a return to shopping will jump start the economy in a way that the current stimulus package will not until 2011.

In many ways it seems to be working.  The rate of new layoffs is slowing even though I would like to see a couple of more months of data before declaring it a trend.  The headline unemployment number is 9.4% and that is very scary but perhaps not as scary as it seems because it is a cumulative number which includes everyone who was laid off prior to the most recent month.  On the other hand, the official unemployment number is not what we should be looking at in the first place.

 

A broader statistic which gives us a much more realistic view of the unemployment picture is U6.  U6 includes people who have been looking for a job for so long that they have either given up in disgust or decided to just sit back and wait for things to get better before they even try.  They are not actively looking for a job but they would take one if it was offered to them.  The “regular vanilla” unemployment figure does not include these people.  U6 does.  It also includes people looking for full time jobs who have only been able to find part time jobs but really want full time jobs.  The “regular vanilla” unemployment figure does not include these people.  Huh.  U6 does.  U6 for May was 16.4%.  Whoa!  16.4% is a HUGE number!  More than one in six Americans is either unemployed or underemployed (do you want fries with that?).  It suddenly becomes very clear why the government talks about the “regular vanilla” unemployment figure and why you have never heard of U6.

 

So, things have indeed gotten very bad although for the time being they have ceased getting worse.  It has to be considered very good news that the global financial system is no longer teetering on the brink of total collapse.  That said, we still have a severe recession to work through.  To paraphrase Warren Buffett (I’d quote him but I can’t write that fast) “The financial climate is much improved from the October through March period which sets up the stage for the economy to grow stronger.  That hasn’t happened yet but we’ve reached the point where it can.”  Many are predicting a soupbowl shaped recovery.  The economy came down hard and will drag along the bottom for quite a while before it starts back up the other side.  That sounds just about right although I have no way of knowing.  In fact, I’m still a little leery of other shoes yet to drop (commercial real estate, credit card debt, and we still haven’t exactly gotten rid of all that toxic waste yet, have we?).  If I seem to be prevaricating and slowly feeling my way along like a blind man in the dark, well, I am.

This leads everybody from consumers to manufacturers to retailers to remain extremely cautious.  For their part, retailers are taking longer than ever to finalize orders.  Of course, they don’t see themselves as being late.  They just want to push as much risk as possible onto their vendors (ahem, “partners”).  With so many Chinese factories having closed, so many laid off Chinese workers, and the lengthened quality regimen, we are fast approaching the point when manufacturers will be physically unable to deliver goods by the time that retailers want them.  Later commitments don’t mix well with longer cycle times.  The prevailing retailer attitude seems to be “We don’t care – get it here or somebody else will fill our shelves.”  But who?  And with what?  Why, the big boys, of course.  Mattel, Hasbro and Lego (do we still consider Leapfrog a big boy?) can afford to tool up and manufacture earlier because they get to amortize costs over a gazillion units sold.  They also get earlier commitments from retail than the rest of the toy industry.  This means that the shelves will be filled with less variety this year.

 

Another onerous note is that Wal-Mart is reducing its toy space by more than half.  The toy department itself has never been all that profitable for Wal-Mart.  Instead it has been used as a loss leader to drive foot traffic during the last four months of the year.  Over the last five or six years, Wal-Mart has committed heavily to the grocery business.  Grocery is also a low margin business but one where Wal-Mart has an advantage because it is not unionized . . . . . yet.  The move into grocery has worked out brilliantly as a traffic builder.  The average Wal-Mart customer now visits their stores once a week rather than once a month.  The toy aisle is no longer needed to drive traffic.  Of course, they’ll keep their hand in and stock the obvious big company items backed by big advertising dollars but they’re not going to think too hard about the toy industry anymore – no more guessing on what will be a hot seller.  They’re just going to focus on moving merchandise – like big jars of pickles.  This will obviously benefit big toy companies who are able to make big TV advertising commitments.  Toys ‘R’ Us also stands to benefit – if they are able to execute.  It’s as if Wal-Mart is taking its foot off of TRU’s throat after nearly destroying them.  It’s certainly not an act of good will, it’s just that toys aren’t that important to Wal-Mart anymore.

 

As for toy company hiring, we are still going through a dark period where there have been many layoffs and very little hiring.  As I have said in this space before, most companies tell me that operationally they need people but their banks won’t let them hire anyone.  Most companies operate on lines of credit, letters of credit and bank loans.  This year many banks have said something on the order of “we’ll give you seventy percent of your usual line of credit but you’ve got to cut costs by twenty percent”.  Due to the seasonal nature of the toy business this has pushed many companies to the brink of solvency.  Many companies are meeting with their banks every two weeks to be told which bills they are allowed to pay.  It’s almost as if the banks think we don’t know who caused the financial crisis in the first place.  It would be nice to see them get their own houses in order before making judgments about others.

Toyjobs has noticed that the hiring climate has grown tricklingly better during May and early June.  I would anticipate that by the end of the second quarter retailers will have mostly finalized their orders and toy companies will be able to approach the banks with a better story to tell.  This leads me to believe that by late August/September toy industry hiring will have improved noticeably although it will still be a long way from good (it’s easy to improve noticeably from zero).   2010 should be better as we move along the gradually inclining slope of the soupbowl curve.  Unfortunately, retailers will continue to push off purchasing commitments as long as possible.  Toy companies won’t be able to breathe easier until July/August meaning that it likely won’t be until late August/September that there is a true resurgence in hiring.

Muddling thru,

Tom Keoughan

By | June 8th, 2009|ToyJobs Blog|Comments Off on “Less Bad” is the “New Normal”

Poor Economy Continues to Dog Toy Industry

The economy remains stagnant as continued layoffs and tight credit have left consumers cautious. Even the currently employed have stopped spending and are hoarding cash because it seems that on any given Friday anybody can be laid off.

Retail sales continue to be poor and have even worsened after the brief January, February upturn which followed a dismal autumn. March retail sales fell 1.1% from February and were down 9% from the same month year ago. The only bright spots were the usual suspects, discounters Wal-Mart, Costco, the Dollar stores and drug chains.

On the brighter side the financial situation does seem to be stabilizing although still not recovering. The LIBOR rate (the interest rate at which banks lend to each other) is now in close to normal territory and the stock market has been recovering as bargain hunters have appeared. Of course, all evidence of “stabilization” could evaporate in a day and we could be back in the freefall zone of last autumn.

The employment situation continues to be bad with lots of people looking for work but few available jobs. Companies are still saying that although operationally they need additional people they are not hiring due to financial concerns and banking restraints. In “the tiniest glimmer of hope” department, Toyjobs has just recently noticed a slight uptick in the number of new search starts. It seems as if during the first quarter 98% of companies had a hiring freeze but now that we’re in the second quarter only 85% do. That is not exactly overwhelmingly good news but we can hope that it becomes a trend that continues.

In a humorous note, Reuters reported on April 17th that Isaac Larian of MGA has offered Mattel an opportunity to pay MGA for the Bratz line after the court awarded Mattel $100 million from MGA and ordered MGA to stop making Bratz, which the court determined was misappropriated from Mattel in the first place. That order was later suspended until the end of 2009. Toyjobs only comment is: “Gee, what a kind and generous offer from Mr. Larian. Bless his heart.”

Muddling Thru,
Tom Keoughan

By | April 14th, 2009|ToyJobs Blog|Comments Off on Poor Economy Continues to Dog Toy Industry

New York Toy Fair: “Better Than I Thought It Would Be”

Despite the giddy pronouncements of some in the trade press I would sum up the New York Toy Fair with one word – subdued. It was better than I thought it would be. It seemed like people were just too tired of complaining to complain anymore. There was a realization that the only way to stay in business was to just go out and work it, even if business stinks. A lot of the people walking the aisles were “consultants” which in this case was code for “looking for a job”. There was pretty good foot traffic on Sunday. The rest of the time things seemed fairly slow except for a sudden surge on Monday from 2 p.m. to 4 p.m. Where did they come from? Where did they go? As for final attendance numbers, it’s all a bit uncertain. Asking a trade show promoter (TIA) about attendance numbers is a little like asking the barber if you need a haircut.

Most mass marketers that I spoke with had their dance cards pretty full with retail appointments but reminded me that this is the “Happy Talk” season and that little was actually being accomplished. Specialty manufacturers fared better, in that, although less of their smaller retail customers were in attendance, those that were there were in an order-writing mood. The grumpiest group was anybody who had paid good money to try to peddle their wares in the “Basement of Gloom”. No traffic, no happy faces.

In many of my discussions, senior toy industry executives are telling me that they need to add people from an operating perspective. However, most companies are not self-financing and rely on bank loans and lines of credit to finance operations. In the current financial climate (which was caused by banks) banks are cutting loans and credit lines and, in some cases, even eliminating them altogether. They are telling companies that if they want financing they will have to cut expenses by 15-20%. The quickest way to do that is through a reduction in headcount. Some companies are laying people off of their own volition while others are being forced to by their banking “partners”.

It’s not like there is any less work to be done and in the toy industry, people weren’t exactly slacking off to begin with. This means that there is a lot of opportunity for consulting work out there. Banks tend to focus on fixed costs (like employees) but if an expense can be shifted to the variable cost part of the ledger (like consulting) it’s much more likely to pass muster. So for all you newly minted “consultants” out there: Work Your Network! It may not be optimal but it can pay the bills until the economy recovers. When will that be? I have no way of knowing, nobody does. My best guess is not before August – October 2010. It won’t happen sooner but it certainly could take longer.

The severe tightening of credit supply means that if you’re in the market to buy a couple of toy companies, you’re in luck. When the economy is in the tank, owners of marginal companies often want to sell their businesses. This is, of course, exactly the wrong time to sell your devalued asset. During these periods there are typically lots of talks but few actual deals. That’s because business owners typically try to price their companies at a multiple of “good times” earnings when they are, in fact, trying to sell because they are barely squeaking through bad times. This time it’s different (I never like saying that). This time banks are choking off credit so that there will likely be a lot of forced sellers. Some companies will have to sell even at a low price or just shut their doors.

Last Friday’s headlines shouted “Retail Sales Show Signs of Life” and “The Consumer Returns” but it was a really a false dawn and not much of one at that. The entirety of the same store sales increase was attributable to the super discounters: Walmart, Costco, BJ’s, Big Lots and the Dollar Stores. Outside of those few, the numbers were negative. Let’s not forget that 40% of Walmart’s sales are from the low margin grocery business. Costco’s grocery percentage is even higher. “People gotta eat! Now they’re eating cheaper!” That’s not exactly a rallying cry for a stronger retail sector.

Open and Shut

Muddling thru,
Tom Keoughan

 

Open and Shut
By | March 9th, 2009|ToyJobs Blog|Comments Off on New York Toy Fair: “Better Than I Thought It Would Be”

Toyjobs Wins Judgement Against A-Ha Toys

The Superior Court of New Jersey has awarded Toyjobs a default judgement against A-HA Toys.  The court is expected to rule on Toyjobs’ suit against A-HA president, Ivars Sondors, shortly.

Toyjobs’ president Tom Keoughan said “Whenever I hear about a company not paying its vendors, I become very reluctant to do business with that company.   I always wonder how companies that don’t pay their vendors will be able to deliver goods to their customers.

By | February 28th, 2009|ToyJobs Blog|Comments Off on Toyjobs Wins Judgement Against A-Ha Toys

Toy Industry: Bleak Forecast 2009

In 2008 the toy industry and indeed everybody had to endure the worst holiday sales season since 1992.  This was truly an awful year where both comparative sales and total sales were down sharply for most retailers.  In some recent years we have seen weak comparative store data even though total sales were fairly strong.  I’ve always argued that comp store sales is a flawed indicator because it fails to take into account the cannibalization of sales that occurs as large retailers continue to build more and more stores closer and closer together.  Think Wal-Mart or Starbucks.  In 2009, we may see a “reverse cannibalization effect” as retail chains shut down large numbers of stores and entire chains go out of business.  It’s my feeling that total store sales is an obviously better measure of how much total “stuff” is sold by a retailer to consumers.  In any case, 2008 was a horrible year for retail when measured by either yardstick.  Only the deep discounters like Wal-Mart, drug chains and the dollar stores had good or even decent years.  Surprisingly, even the warehouse clubs did poorly.

The combination of a terrible holiday sales season and the credit crunch economy proved too much for several weaker retailers who were forced into Chapter 11 or even liquidation.  KB Toys, Circuit City, Linen & Things, Office Depot and Gottschalks all went under.  The retail death watch continues with Dillards, Claire’s, Duane Reade, Talbots, Bon-Ton Stores, Pier One Imports and even Borders all rumored to be teetering close to bankruptcy.  In addition to outright failures many retailers will close a significant number of stores.  It is estimated that 200,000 stores will close by year end.  Fewer stores means less shelf space to fill which translates to less overall sales for toy companies.  As always there will be winners and losers.                           

Most companies are not self financing and rely on bank loans or lines of credit to finance operations.  In the current financial climate where banks reticent about lending even to the strong, I would expect weak and marginal companies to struggle.  Starting this past September we began to see toy companies either fail or be bought out by stronger rivals.  I would look for the trend of acquisitions and company closings to continue and even accelerate.       

With the news that several key retailers were not going to attend the January Hong Kong Toy and Gamers Fair, toy executives spent the month of December scrambling to get the 2009 sales season rolling with those major retailers that weren’t going to attend.  Once in Hong Kong, some complained about the retailers who weren’t in attendance and some even said that the show was a waste of time.  Other, more optimistic types saw it as an opportunity to really focus on second and third tier customers.  It was also noted that the international retail presence was particularly strong.              

I was both curious and concerned that with oil, resin and transportation prices coming down that retailers might try to claw back the already less than adequate price increases they allowed toy companies in 2008.  The word back from Hong Kong was “they asked but they didn’t demand.”  Toy companies were able to cite high safety testing costs as a reason why prices shouldn’t be rolled back.  Also discussed, was that with so many Chinese toy factories closing (more coming after Chinese New Year?) that U.S. toy companies had little negotiating leverage left with those factories that remained.  Price stability will be crucial in 2009 as both lower sales volumes AND tighter margins would be a recipe for disaster.  That said, my best guess is that 2009 will be the toy industry’s most difficult year since I started out in 1981.                

Toyjobs had a respectable year in 2008.  After getting off to our fastest first half ever, we entered the third quarter and unfortunately, there pretty much wasn’t a third quarter.  We were lucky that we had, what for us was, an average fourth quarter.  That said more than half our fourth quarter placements came from a single client who was hiring due to a corporate relocation.  Overall we were about 15% off of our average for the year.  That’s not bad because our average is pretty good.  I’m happy with our results in 2008 but I am even more happy that the year is over.  The only thing that I’m not happy about is the outlook for 2009.  I foresee that by the end of the year there will be fewer retailers, fewer toy factories, fewer US toy companies and yes, fewer toy recruiters.  I hope that when it’s all over everybody reading this will still be standing.   We, here at Toyjobs, certainly intend to be.   

 

See y’all in New York, 

Tom Keoughan

By | January 27th, 2009|ToyJobs Blog|Comments Off on Toy Industry: Bleak Forecast 2009