Toyjobs.com Archives

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 ToyJobs|2020-11-20T08:51:01-06:00December 7th, 2011|ToyJobs Blog|Comments Off

It Wouldn’t Be Toy Fair Without Snow

The New York Toy Fair brought both the annual snowfall and a sense of realistic optimism which was far more encouraging than last year’s dour face fest. The mood was upbeat but realistic and mostly devoid of trade show happy talk (We’re doing great! Everything’s fantastic!) although a few other toy industry commentators did suffer from a little “irrational exuberance.”

Traffic was very strong on the three days that I was there. I even saw smiles in the “basement of gloom” as downstairs traffic was much improved over last year. Several toy industry executives commented that the quality of the traffic was quite high and that there were a lot of mass market buyers in attendance. Exhibitors also said that smaller specialty stores were writing a lot of orders.

I’ve lost some weight so that my feet weren’t as sore as usual as I traversed the world’s hardest floors. There were a few clients and prospective clients that I didn’t get to see because they were always busy with customers. I don’t look at that as a bad thing: sell away, grow your businesses, add more employees – I am very happy with that.

There were a sizable number of mass market toy manufacturers not “showing” but still skulking through the aisles and taking meetings in the food court and other clandestine corners. Personally, I miss that room on the 13th floor of the toy building that had all the big leather comfy chairs. It was down the hall from “the mayor of the toy building” Bob Gellman’s showroom. It was great to see Bob at the Javits Center in 2010.

One complaint that I heard from several attendees and would like to echo myself is the demise of the printed Toy Fair directory. This was a very handy and useful tool that sat on or near the desk of many a toy executive, me included. Although billed as part of a “green initiative” this was clearly a cost cutting measure. One booth attendant told me “we tried to move it online but most of the companies didn’t sign up.” I do applaud “the virtual tote bag” program. What could I possibly do with another Homer Simpson key chain? Doh! We should try to differentiate between useful and just plain waste.

Part of the reason for Toy Fair’s optimistic tone was likely due to Wal-Mart’s strong showing for both the fourth quarter and the year. As the world’s largest retailer Wal-Mart’s financial reports are a closely watched barometer of the economy as a whole. For the fourth quarter total sales rose 4.6% with a 22% increase in profit. On an annual basis, Wal-Mart’s total sales rose only 1% (we all need to remember how awful the first seven months of 2009 were) and profits were up 7 percent. While the fact that same store sales (which don’t include the effects at Wal-Mart cannibalizing it’s own stores) for the fourth quarter were down 1.6% may be of interest to Wall Street analysts; as suppliers the toy industry is much more concerned with how much total stuff moved off total shelves. So, not a bad year for the world’s largest retailer in the midst of the worst economic climate since The Great Depression.

In other Wal-Mart news, toy industry executives were initially concerned with the announcement of a global sourcing partnership with Li and Fung. The unit will be called WSG and Wal-Mart has the option to take full control of it in 2016. Initially, that sounded a bit ominous to everyone but it appears that WSG will be focused on non-branded private label merchandizes. Due to Wal-Mart’s shrinking of the toy department, that’s not really what they’re buying for the toy aisle anymore anyway. In the short to mid-term though, I can envision Wal-Mart putting together direct to retail deals between licensors and its WSG unit. This could easily affect things like kids licensed backpacks and stationary and other items not requiring much tooling (or risk) and could possibly be expanded down the road.

As far as toy industry hiring, we are beginning to get some job offers. New search starts are continuing but at a slower pace than the first of the year new budget bump. I continue to see this as a recovery year where hiring will continue to gradually improve especially in the second half. It’s still not good out there but it is much better than last year. We all have to muddle our way through and hopefully by 2011 things will be mostly back to normal.

Muddling through,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00March 3rd, 2010|ToyJobs Blog|Comments Off

Toyjobs.com: Review and Forecast

Same store retail sales eventually rallied after a late December snow dump to rise about 3 percent. Of course, this was compared to the very weak year earlier period. It’s also difficult to discuss retail sales trends without including Wal-Mart, but Wal-Mart doesn’t report monthly sales data anymore. As a shareholder, I like that but as a chronicler it’s a pain in the neck. I would assume that in the current economic climate they did well but we should also keep in mind that their December ’08 numbers were better than most which will skew current comparisons downward.

During the past year retailers seemed to get it just about right. They navigated the tough economic terrain by discounting just a few items and offering other promotions but by keeping prices relatively steady for much of their inventory. Of course in the toy aisle, Wal-Mart did its usual October price slashing which was then followed by much of the retail community. NPD reports that overall US toy sales were down by 2 percent. Obviously that isn’t good but it is far from being catastrophic.

While the congress fiddled (yes, the Nero illusion is intended) with a healthcare plan that almost nobody wanted, the rest of the country focused on jobs. The economy began to grow in the second half of 2009 but the jobs market lagged behind with businesses still being reluctant to hire. Although the December headline (U3) unemployment number was unchanged at 10% from November, the broader measure of U6 – which includes those forced to work part time or discouraged from seeking work – rose from 17.2 to 17.3 percent.

Here at Toyjobs we had our worst year ever. The overall number of searches was way down and many of the searches that were started were canceled or put on interminable holds. Waxing philosophically, “Some days the fish are there and some days they are not but I’m out there fishing hard in either case”. Perhaps a quarter of all search firms went out of business last year but thanks to three decades of success Toyjobs is in strong financial shape and I will be out there fishing well into the future.

Recent discussions with toy execs returning from Hong Kong reveal that the mood at the Hong Kong Toy Show was mostly buoyant. Retailers were pretty clean on inventory and were looking to buy. That said, toy companies may want to temper their enthusiasm. Wal-Mart and Target are cutting back on toy space, SKUs, and vendors.

In Wal-Mart’s case, toys have never been all that profitable and have primarily been used to drive foot traffic during the fourth quarter. The “groceryization” of Wal-Mart has worked out so fantastically – with the average customer visiting the store once a week rather than once a month – that toys are 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 business anymore – no more guessing at what will be a hot seller. They’re just going to focus on moving merchandise. Don’t expect them to take any chances. I’m not sure of the thinking behind Target’s strategy (no grocery to drive traffic), perhaps it’s just a case of me-tooism.

This trend will obviously benefit big toy companies who are able to make big TV advertising commitments. It also allows other retailers to create a larger toy footprint without having to compete with Wal-Mart’s crushing margins. Sears has been testing getting back into the business. Barnes and Noble and Borders, two retailers who generate a lot of traffic despite Amazon, are putting a greater emphasis on toys. I suspect that other retailers will follow suit now that they won’t have to compete with Wal-Mart’s pricing. Not initially, but over the longer pull, toy companies should be pleased with the ability to diversify their customer base and at higher margins.

The biggest beneficiary of the Wal-Mart/Target downsizing of the toy department should be Toys ‘R’ Us. People like to shop specialty stores because of their broader product offerings. Toys ‘R’ Us is also taking big steps to counteract their Achilles heel – the fact that they have traditionally been standalone – separate trip stores. During the past holiday shopping season they opened more than 80 pop-up stores in malls and shopping centers. The concept may have been quickly conceived and erratically executed but they should have it nailed by 2010 or 2011. Toys ‘R’ Us has also been working hard to turn itself into a destination by placing its Babies ‘R’ Us and Toys ‘R’ Us stores side by side. Babies ‘R’ Us can function similarly to Wal-Mart’s grocery business by bringing in customers for their weekly needs (diapers, wipes, etc.) and acting as a feeder for Toys ‘R’ Us. We should all hope that this strategy works as the toy industry surely needs a stronger Toys ‘R’ Us.

Here at Toyjobs, search starts jumped significantly in mid December as companies anticipated a new year with new budgets. It is still too soon to tell if this improvement will be sustainable throughout the year or if it is just a new budget bump. It is also too soon to tell if these search starts will turn into actual hires or be canceled or put on hold as so many were in 2009. I should have a much better handle on that by the time of our post New York Toy Fair issue. I can tell you that the air is different than it was even six months ago. It “smells” better. Certainly some companies are still having problems and most companies are still cautious but the palpable sense of fear is gone and has been replaced by a feeling of “we’re working through it”. My sense is that this will be a recovery year much like 2003. It won’t be a good year but it will be increasingly better than last. I just hope that we only have ONE recovery year rather than two or three.

Muddling thru,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00January 25th, 2010|ToyJobs Blog|Comments Off

Foot Traffic Increases But Spending Slows

Over the Black Friday weekend, massive human herds were out in force but retailers pacified them with electric fences, cattle prods and lots of large blue salt licks scattered about. It seems that even though foot traffic increased; the hordes were spending less on a per capita basis than even last year’s poor numbers. Is it possible that these creatures spend more when they have been whipped into a full frothing frenzy? Needless to say, I wasn’t to be found anywhere near any retail outlet for the entirety of the greedfest.

Weekend sales were balanced by a surge in both sales and traffic on Cyber Monday. Forrester Research projects that holiday season online shopping may grow from 6% to 10% of all holiday sales. Even with this growth, online sales are still too small to push the overall sales needle by much and a lot of the increase may simply be the result of cannibalization of bricks and mortar sales. This may portend a long term shift in consumer patterns more than it actually affects sales volumes today. Employers may be concerned that most of this online shopping takes place during office hours which echoes trends seen at Toyjobs where our analytics show that our job board is accessed mainly during weekdays and drops off significantly during evenings and weekends.

It’s important to remember that Thanksgiving is a notoriously poor predictor of sales for the holiday season as a whole. It is typically eclipsed by the last weekend before Christmas. This year there is concern that light retail inventories will mean that there won’t be many choice goods left on the shelves by that time. The most widely cited forecast for this year’s season calls for a 1% decline in holiday sales from last year’s already weak showing. Furthermore, a 2005 study shows that retail forecasters have a tendency to overestimate sales. All this leaves me with little solid footing in guessing (and that’s really what it is) where retail sales will end up. I think it’s pretty clear that it won’t be “good”. It just remains to be seen how “bad” they will turn out although I don’t think the end result will be disastrous. We’ll just have to wait and see.

Last Friday’s jobs data seem to indicate that we may be beginning to turn the corner on the employment front. Jobs lost in November were down to 11,000 (a drop in the bucket considering the size of the population) and the unemployment rate drifted lower from 10.2% to 10% (still incredibly bad). Significantly, U6 (a broader unemployment statistic which includes: the underemployed, part timers, “consultants” and the totally disheartened) has gone from 16.3% all the way down to 12.2%. While those numbers are an improvement, one month does not make a trend and economic indicators don’t usually travel in a straight line.

When you consider everyone affected by unemployment (spouses, kids, dependent elderly parents), the “percentage of the affected” is huge. Throw in that one in eight Americans is currently benefiting from some sort of food stamp program and it becomes quite clear that we are a very long way from being out of the woods.

Anecdotally, Toyjobs has found that things are continuing to improve. In fact, I would say that the improvement curve has steepened in just the last few weeks. A year ago, when we would call longstanding clients about possible job opportunities – they would just laugh. Currently there is a lot more chatter. This hasn’t shown up on our jobs board as of yet, but I predict that it will over the next six weeks. We have a lot of outstanding unsigned search contracts out there (these are contracts sent to clients at their request but not yet signed and the search not yet started). Also we are having a lot of discussions with companies getting ready to start searches but waiting to see how holiday sales and the January Hong Kong Toy and Games Fair pan out. What is less spoken of, and is probably the Joker in the deck, is how banks will deal with loans and lines of credit. Things seem to be slowly loosening up but I still have a hard time believing that seasonal fashion businesses are on the top of anybody’s lending list. I’m not yet ready to say that I’m cautiously optimistic. I am more comfortable with the phrase – optimistically cautious.

Happy (?) Holidays,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00December 8th, 2009|ToyJobs Blog|Comments Off

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 ToyJobs|2020-11-20T08:51:04-06:00August 1st, 2009|ToyJobs Blog|Comments Off

“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 ToyJobs|2020-11-20T08:51:04-06:00June 8th, 2009|ToyJobs Blog|Comments Off

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 ToyJobs|2020-11-20T08:51:04-06:00April 14th, 2009|ToyJobs Blog|Comments Off

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 ToyJobs|2020-11-20T08:51:04-06:00March 9th, 2009|ToyJobs Blog|Comments Off

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 ToyJobs|2009-02-28T09:00:49-06:00February 28th, 2009|ToyJobs Blog|Comments Off

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 ToyJobs|2020-11-20T08:51:04-06:00January 27th, 2009|ToyJobs Blog|Comments Off

12 Next