Toys ‘R’ Us

Dallas Fall Toy Preview: Better Than Last Year, But…

Let me first say that I love the Fall Toy Preview Show in Dallas. I can spend two days and meet with twenty-five toy company presidents. Toy execs have a fair amount of down time in Dallas and I’ve become pretty good at catching them standing around without a lot to do. That said, what’s good for me isn’t necessarily good for the companies who are spending a lot of money to exhibit there. Let’s face it, last year’s Fall Toy Preview was pretty abysmal, but I was pretty confident that the TIA and its board realized that. My thinking was that they would make some changes to improve it.

Early Tuesday I noticed that cosmetically it was a better show. Overall space was reduced and the booths were configured in such a way as to make it “feel more full.” That didn’t really hide the fact that the aisles had a number of blind alleys with no exhibitors in them. It also didn’t hide the fact that key toy manufacturers continued to pull out. There were a bunch of new companies up on the 13th floor but a lot of those were one trick ponies rather than companies with full product lines. I’m not sure how much buyer attention they really got. It seemed as it the TIA did a really good job of selling them.

I’ve always felt that Trade Shows were most productive when manufacturers primarily focus on working the mid-tier accounts. While it’s nice to get a little face time with buyers from Wal-Mart, Target and Toys R’ Us, generally speaking you are not going to accomplish a lot with them at a show. It’s preferable to travel to their headquarters and spend some focused quality time. At a show, mid-tier accounts are more likely to move the ball meaningfully forward. By having them in one place at one time you can also potentially cut costs by reducing visits to headquarters. Unfortunately, half of the mid-tier did not show up. Kohl’s Meijer, Shopko, Walgreen’s and others were nowhere to be seen. You’ll still have to go to Grand Rapids. You’ll still have to go to Green Bay.

Those are the criticisms and mid-day on a Tuesday a lot of the toy execs that I spoke with were a little bit grumbly. However, by the end of the show the negative perceptions had radically changed. By Wednesday afternoon, literally everyone I spoke with said they were having a great show. The comment I heard the most was: “We had less meetings but they were really productive meetings.” And, while a bunch of the Midwest Mid-Tier accounts didn’t attend, Amazon, Family Dollar, CVS, Michael’s, Hobby Lobby and others were there and open for business.

One often mentioned major disappointment was that Toys R’Us didn’t send any senior executives. The Buyers were there but the senior team that had been planning to attend cancelled at the last minute. Certainly they would have been besieged by questions but the proper thing to do was send a team to deliver a consistent, coherent message as a balm to the vendors they had just recently stung.

Perhaps the TRU no show was due to the basic unfairness of the US bankruptcy code. Under the law, Toys R’Us will get to choose a list of “critical vendors” which it says are “critical” to its ongoing business. If you are a large toy company like Mattel, Hasbro, Lego, Spin Master, Jakks or MGA you may receive 90% of the monies that you are owed by Toys R’Us while the smaller fry may only get a nickel on the dollar. If you’re a small toy company and you object too much well then your products need not grace our shelves going forward. Even if you’re a large company and you are negotiating too hard you can find yourself dropped from critical vendor status. It appears that during the Chapter 11 workout, Toys R’Us has a pretty strong hand.

Chart for Toyjobs Newsletter

Of course, everybody wants Toys R’Us to survive. Aside from Amazon it buys the broadest range of toys on the planet. Eliminating their debt will allow them to operate at a profit but they will need to make some sweeping changes going forward. Lifting the debt load from their backs should give them ample money to make those changes, but first they need a strategy. They need to shutter unprofitable stores and clean up the ones they keep open. They should broaden their product selection and become a destination. Unfortunately, they have to become a destination because most of their stores stand alone. They are a separate trip. Roll with that and go BIG! Become a kid’s destination with play zones, food, PIZZA!, host birthday parties and hook up with movie theatres. Of course, these changes may risk lowering their dollars per foot of shelf space. Maybe it’s worth it? Also, Toys R’Us had an early advantage in e-commerce sales but their performance has been quite poor. They should bring someone in from the outside to fix it.

All of that is way above my pay grade but what I do know is that now that TRU is in Chapter 11 they have to pay their vendors going forward. It’s time to fill the pipe. Toys R’Us has a period of time to adapt to the ongoing American Retail Transformation (ART…yeah, I made that up). They need to bring in the people to formulate a prescient and winning strategy and then they need to execute. If they don’t it may be five years it may be ten but they could find themselves going from Chapter 11 to “Chapter 22.”

Shift in Shopping

The Toys R’Us bankruptcy has meant uncertainty for toy manufacturers. The current turmoil and transformation going on in retail has meant even more uncertainty. When confronted by uncertainty most companies cut spending which means reduced hiring. Even with unemployment returning to its pre-economic crisis lows, toy companies have been slow to hire.

There and Back Again

Early in the year Toy Executives were telling me that they needed to add people but didn’t want to start searches yet. That changed in early August and they were having Toyjobs start searches in droves. As recently as the Dallas Fall Toy Preview, I was telling people that “we have done all these searches where companies have picked their person but haven’t pulled the trigger.” Fortunately, we successfully concluded three searches in the last week. I also expect to close two or three more in the next week and a half. What does that mean going forward? Uncertainty. It’s hard to say.

I’d like to close with an ancient Chinese curse: “May you live in interesting times.” And follow it with another quote of a more recent vintage: “We spent the second thirty five years trying to figure out how the first thirty five could have been so easy.” –Mick Jagger

All the Best,

Tom Keoughan

By | October 18th, 2017|ToyJobs Blog|0 Comments

News Groups Fudge Retail Numbers to Sell Advertising

So what is with all the wild headline swings on retail sales numbers? On December 26th, Reuters put out “US Holiday Season Beats Expectations On a Late Shopping Surge” but then on January 14th they said “US Retail Sales Drop Biggest in 11 Months.” Oh! We had all been feeling rather good but were we wrong? Did we miss something? “Gee, I thought I had read that ShopperTrak had reported that holiday sales had risen 4.6% and Third Quarter GDP rose 5% and we all know that gasoline prices are lower. What’s going on?” Yes indeed, the Commerce Department put out a report on January 14th that retail sales for December had dropped a seasonally adjusted 0.9%. One had to dig a little deeper to learn that plunging gasoline prices had caused gas station receipts to plummet by 6.5%. When you take service stations and restaurants out of the mix, the National Retail Federation reported a 4.0% holiday sales increase from the year before. How confusing! How misleading! Why would “news” organizations report headlines in such an irresponsible way? The only thing that makes sense is that they wanted to gather more eyeballs so they can sell more advertising and at a higher price. You get a sense of this when you check the weather on the TV News. Ever since Superstorm Sandy, any little sprinkle is treated like a major dramatic event.

There was more than a little sprinkle at Toys ‘R’ Us, which reported that sales at its US stores were down 5%. TRU execs did point out that gross margins did improve 2% but one doubts that was enough to grow overall profits. There is an overall sense of chaos in most departments at Toys ‘R’ US headquarters. Last September they announced their “New Strategy” which started more than a few eyes rolling. The new tack could be summed up as “we’re going to do the same things…but better.” Uh huh…

North of the border, Target is closing its 133 Canadian stores and will stiff its vendors. Suppliers will be asked to “Look, just eat it” if they want to continue selling to Target’s US stores. Fortunately, most of the senior toy executives from small and mid-sized firms that I’ve talked to haven’t been too badly burned. I suspect that may be different for the Mattel’s, Hasbro’s, and Lego’s of the world.

Ordinarily, I would think that two years is not a long enough period to give a startup to gain traction. That said, it appears that the rollout of Target Canada was botched from the start. Their locations were mainly former Zellers stores in rundown and out of the way shopping centers. They took on too much at the same time by opening their stores and trying to build out their supply chain simultaneously, which led to rows and rows of empty shelves. Many business enterprises, including Toyjobs, live by the basic business rule, “Never try to sell anything before you can deliver it.” Lastly, their pricing wasn’t competitive. Like New Coke, Target Canada will likely be a text book case for those seeking MBA’s of what not to do for decades to come.

Fortunately for the rest of us, the Toys ‘R’ Us and Target Canada debacles are merely outliers. Holiday retail sales were up the most in many years. The economy and the employment picture are both improving. Here at Toyjobs, we had a very solid year. Both search starts and placements were back to pre-2008 levels. I hesitate to say that things are back to normal because our client’s searches were overwhelmingly focused on sales executives. Marketing and product development jobs are just starting to percolate. Typically toy companies are looking for that type of talent starting in late February (when the trade show season ends) through July. It’s a little too early to know if those types of searches will ramp up again this spring but my discussions with Toy Execs lead me to believe that they will. The economic recovery has been hampered by misguided government policies. It’s like we’ve been trying to get rolling with the emergency brake still on. The environment is now improving at a much quicker pace. Things are getting better faster. It feels like the train has left the station and is finally picking up speed. We should all be able to breathe a little easier.

I look forward to seeing you all at The New York Toy Fair. Will there be snow?

Tom Keoughan

By | January 26th, 2015|ToyJobs Blog|Comments Off on News Groups Fudge Retail Numbers to Sell Advertising

Toy Hiring Approaching Normal But a Little Too Early To Call

Toy Industry hiring continues to be strong and the job environment seems to be close to back to normal. I don’t want to “call it” until we see what search start volumes are coming out of the summer doldrums. The usual mid-August ramp up was delayed last year until early October. I’m a big believer that hiring in the toy industry is event-driven. One event trigger is when the product ships. When that happens, companies relax a little bit and feel better about themselves and then start hiring. Last year, retailers delayed having goods shipped until late September/early October. I’m guessing that will be a structural shift and goods will continue  to be brought in later as retailers continue in their never ending quest to shift as much risk as possible onto “their partners” in the seasonal fashion goods business.

It would also be nice to see an uptick in Marketing and Product Development jobs. Prior to the financial crisis, those positions were Toyjobs’ bread and butter. During the crisis whatever hiring there was focused on safety, sourcing, and sales. That only makes sense: there was a big product safety brouhaha in 2007 and safety issues were put under a magnifying glass. Regulations (some ridiculous) were constantly changing. Sourcing is simple code for “beat down the prices at the factories.” Sales, well we all want more sales and many business owners and senior managers subconsciously (I’m being kind) blamed poor sales on their Sales guys rather than the economic collapse. In any case, Marketing and Product Development jobs seem to be just starting to pick up. That is a sign that toy companies are moving from a defensive position and are looking to do new things. For me to declare the hiring environment “back to normal” it is important for that trend to fully develop.

Many people have been able to change jobs over the past year and that looks set to continue. Unfortunately, there are far too many people who have been unemployed for a long time. For people who have been out of work for three or four years, things are extremely tough. If you have been consulting, it is important to list what projects you worked on and what companies you did them for on your resume. Also highlight them in your interviews. For the long term unemployed who haven’t really been doing any consulting it may be time to reinvent yourself and perhaps even reset expectations. I know that is very difficult but it may be even harder to find your way back to your old career.

It’s not so much that companies are discriminating against the long term unemployed as much as there is strong competition for every job and that competition includes a lot of people who were doing that job just yesterday. For about five years, even employed people who wanted to change jobs had nowhere to go. Now that jobs are opening up, currently employed people with an up to the minute skill set and current connections are going to naturally be in the front of the line.

If you have legitimately been consulting, you can work your way back inside. If you haven’t, it may be time to reinvent yourself and move onto the next phase of your career. I know that’s very difficult to hear, but not as hard as continuing to pound on doors that aren’t opening.

For the rest of us, we should feel especially grateful for having come through this thing mostly intact and should reach out to help others who need it when we can.

The best to all,
Tom Keoughan

By | May 6th, 2014|ToyJobs Blog|Comments Off on Toy Hiring Approaching Normal But a Little Too Early To Call

Toy Fair Has Upbeat Vibe – Toyjobs Has 3rd Best Month Ever

Toy Fair Has Upbeat Vibe – Toyjobs Has 3rd Best Month Ever

After the requisite snowstorm, New York Toy Fair opened up Saturday night with the annual TOTY Awards dinner. Shirley Price and her team did a fantastic job and this event was even more fun than usual. It was especially gratifying to see that six of the twelve category awards were won by companies that have been in existence for less than three years such as Goldieblox, Choons Design and blog1Just Play. Choons Design’s Rainbow Loom won three category awards as it cruised its way to the Toy of the Year. So much for the carpers and back benchers who say that only the big boys win awards.

There were several inductees into the Toy Hall of Fame including Jill Barad, who gave a rousing speech which graciously gave shout outs to numerous mentors. Jack Friedinan of LJN, THQ and Jakks Pacific; Horst Brandstatler, founder of Playmobil and Wham-O founders Richard Knerr and “Spud” Melin were honored as well.

Next on the event calendar was the annual Women in Toys Dinner. Somehow Genna Rosenberg, Ashley Mady and their team continue to make this event better every year. How do they do that? …and how will they keep it up? Amongst the Wonder Women Award winners were Rita Raiffe of Gund garnering a well deserved Lifetime Achievement Award and Debra Sterling of the runaway start up Goldieblox. I think the award for funniest acceptance speech of the evening probably goes to Michelle Litzky who pretty much cracked everybody up.blog2

The always elegant Joan Luks will be stepping down as President of Women in Toys. Joan is someone who always put way more in to the organization than she took out. I’ll not be surprised if she continues to do that in her post-presidential role. New President Ashley Mady will have a heavy torch to carry but she certainly has the talent and energy to do so.

Toy Fair itself was very positive and upbeat which was a surprise considering that October’s Dallas Toy Preview was a bit gloomy and toy sales didn’t exactly rocket to the moon this past holiday season. Despite the travel-snarling snow, foot traffic was up 14% on Sunday and 9% on Monday. Tuesday was up 3% and Wednesday? …I can’t really tell you because, as is always blog3the case, like a lot of people I went home. All the major toy retailers had buyers there and that includes Wal-Mart, Target, Toys ‘R’ Us, Amazon, and Costco.

What I heard from senior toy executives who were actually showing at the Toy Fair was very different than usual. What they repeatedly said went something like this: “While retailers have already decided on the core of their planograms, there has been a lot of indecision on the part of buyers. We were able to fill a few nooks and crannies simply because we were here.” Interestingly, I heard that from every single company with a booth that I spoke with – no exceptions. I only heard otherwise from several senior toy executives who weren’t showing but instead just walking the show, poking around, and taking a few meetings. From them I heard the usual: This show is so expensive and we’re “really all done anyway.” It seems to me that it is a self-fulfilling prophecy. If you’re not out there pitching at a place where you can meet twenty of your top customers in a period of four days – you may indeed be “really all done anyway.” I would encourage those people to talk to their friends who had full booths at the show and see what they have to say.blog4

Kudos, as always, goes to Carter Keithley, Stacy Leistner and the whole TIA crew for hosting an outstanding Toy Fair. They pretty much had their hands into most of the outside events as well. To paraphrase fast Eddie Felson – Toy Fair is Back!

 

Mirroring the regained enthusiasm at New York Toy Fair, Toyjobs has continued to knock it out of the park. After having out best month in thirty-two years in December, we quickly followed with our third best ever month in February. Toy companies are looking at new talent and they’re pulling the trigger. Best of all, companies are hiring senior people which means they’re not just doing patchwork. Toy companies are looking to do new things and they need senior people who can find and execute on new opportunities.

The increase in hiring is reflected in the economy at large as well, Non-farm payrolls grew by an encouraging 175,

blog5

000 (seasonally adjusted) in February despite severe weather challenges in much of the country. Even though Toys ‘R’ Us started rolling layoffs last Tuesday culminating in a “Pink Friday,” the economic picture is brightening. The point of inflection appears to have been at the beginning of last October. Let’s hope that the economy continues to improve and that hiring keeps on keepin’ on. It has every indication of doing so. Spring may at long last be at hand.

All the best,
Tom Keoughan

By | March 12th, 2014|ToyJobs Blog|Comments Off on Toy Fair Has Upbeat Vibe – Toyjobs Has 3rd Best Month Ever

Toyjobs Logs Best Month Ever

In December 2013, Toyjobs recorded the best month ever in its thirty-two year history. Not only was hiring strong in general, but many toy companies were hiring people at senior levels. This is a strong indication that the industry as a whole has left behind its primarily defensive posture of the economic downturn (teenage ninja heads in shells) and is now aggressively looking for opportunities (mutant turtle heads popping out of shells).

Typically, toy recruiting slows in January and February as the industry is focused on running from one trade show to the next. However, this year activity has not let up and search starts have continued to be strong. It can be difficult to actually close searches during this time period with so many people on the road but I think that the high level of search starts bodes well for toy industry hiring in February, March, April, and beyond.

Holiday toy sales were down slightly and no brick and mortar retailer stood out as having a great year. Several retailers came into January with particularly grim results. Toys ‘R’ Us and Kmart staggered out the holiday season punch drunk and wobbly. Costco’s toy department bombed. Even Dollar stores and the value channel were hurting. Our award for the worst behavior for a retailer this season goes to Target. Not only did Target have a massive breach of consumer data, but they are now compounding it by trying to strong arm suppliers into paying for their credit card problems.

Many retailers overpromised consumers on their ability to deliver late purchased goods. Some were advertising that orders placed as later as December 22nd would arrive before Christmas. This will only serve to increase already growing consumer cynicism over retail practices.

Retailers also cut into their own margins with “discounts” which were early, constant and deep. Even though many of these “discounts” were built into the purchase price, a lot of potential earnings for both retailers and their suppliers were still left on the table.

On the positive side, online retailers like Amazon, Zulilly and others absolutely knocked it out of the park. Offering both price and convenience is an unbeatable combination and physical retailers have a difficult task ahead in figuring out and presenting their value proposition to the consumer. Personally, I can’t think ofgeared up a single reason why I would want to be caught dead in a large retail store or mall during the holiday shopping season.

Total retail sales also improved. I can’t help but think that without any red hot toy smashes in 2013 that there were a lot of Xboxes, iPads and Microsoft Surfaces under the tree. Total retail sales are an indicator of the economy as a whole. As it improves, toy sales should come along for the ride…as long as we have engaging product.

Most economic data continues to improve, including the unemployment rate with the headline number (U-3) dropping in December to 6.7%. That said, the headline unemployment number is greatly understated on two fronts. First, a more accurate gauge of financial pain is U-6. U-6 represents unemployed people, plus people who are employed as a consultant or on a part-time basis but would prefer full-time work. It also adds people who have quit looking for work but would take a job if they could find one. U-6 currently stands at 13.1%. Another area of understatement is that U-3 does not consider people who have left the workforce or have stopped looking for work. You may think – “Well, how do they do that? How do they just decide to leave the workforce?” The answer is that most of America is populated by two income families and when one of the earners is either unemployed or underemployed, then the entire household is financially pinched. Rather than thinking about a 6.7% unemployment rate, a more accurate way of looking at the employment picture is that 20% of two income families are living worse off than they used to. As depressing as that may be, statistics are just a snapshot of a moment in time. The best way to view them is by looking at the trend history. Both U-3 and U-6 have been consistently improving. Unfortunately, the trend in people leaving the workforce is not. However, that should turn around as the first two continue to improve.

Looking forward, most economic data is improving. Employment data is improving, it’s overstated, but the trend is consistently growing better. Retailers had a difficult year but it wasn’t terrible –except for a few of them. Because retailers played it very cautiously in 2013 – ordering fewer goods and ordering them later – inventory levels are okay and there is not a lot of carryover. I expect retailers to play it the same way this year even if once again it means losing out on some sales due to empty shelves late in the holiday season. Most importantly for toy industry hiring is that manufacturers are hungry again and are actively looking for opportunities. This means they will need key people to recognize and seize those opportunities and more people to execute on them.

I look forward to seeing y’all at The New York Toy Fair!

All the best,
Tom Keoughan

By | January 28th, 2014|ToyJobs Blog|Comments Off on Toyjobs Logs Best Month Ever

Another Black Friday Disgrace – While Toy Hiring Soars!

Another year – another national disgrace as the human herds were once again rampaging through the nation’s retail outlets in what is little more than legalized wilding. While spreading out the bait over several days made the peak frenzy a little less intense, it also means that we now have four consecutive days of mayhem.

As usual, we had human (?) stampedes, knockdown merch, brawls, aggressively unnecessary pepper-sprayings, shotgun battles over parking spots, a guy stabbed while carrying home his new big screen TV, police officers being dragged by cars through parking lots, and a new low: kids having a stun gun fight in a Philadelphia mall.

Thank you Wal-Mart, Thank you Target, Thank you Best Buy, Thank you Kohl’s for inciting this dehumanizing behavior. If I or a member my family was foolish enough to venture out into these deal hunting scrums and became injured; you can be sure that I’d be having a phalanx of the most rabid attorneys around suing you for intentional reckless endangerment. I’m sure we could find a slew of other legal misdeeds as well (BLACK FRIDAY DEATH COUNT)http://s.wsj.net/public/resources/images/P1-BO270A_Econo_NS_20131206180603.jpg

More people were out participating in the melee than ever before, but on average, people spent less than last year ($407 vs. $423). Maybe retailers’ promotional activity pulled forward some holiday purchases earlier into November. Maybe, with smart phones at the ready, consumers are better able to make price comparisons and sniff out the best Black Friday deals. What does appear clear is that retailers have cut costs so much that it will negatively affect their margins and those of its suppliers (Wait? That’s us!).

In the meantime, toy industry hiring has soared. As reported here last time out, search starts rocketed in early October as children’s products started hitting the retailers’ shelves. Toy companies have been filling those jobs at a feverish clip which continues to this day. The pace will likely be maintained through year end. On January 2nd, the toy industry, as a whole, will board the planes for their annual pilgrimage to Hong Kong. This time out, a whole lot of business cards will be wearing fresh, wet ink.

The surge in hiring appears to be mirrored in the economy at large. Payrolls increased by a seasonally adjusted 203,000 in November. Earlier months have been revised upward and the job increases have now averaged 193,000 for the past three months.

http://www.washingtonpost.com/rf/image_296w/2010-2019/WashingtonPost/2013/12/06/National-Economy/Graphics/296GDP1206.jpgThat is nearly enough to impact the unemployment rate in a meaningful way. The jobs recovery has had false starts before, but this time it seems much more solid and sustainable.

Other economic data seem to support an improving outlook. Third quarter economic growth has been revised sharply higher to 3.6%. US consumer spending is up 2.1% from a year ago. Wages are up a modest 0.2% Consumer Confidence is on the rise and The Federal Reserve reported that credit card debt has risen to the highest amount in three years. All of those are hopeful signs that shoppers will be out buying more toys, Xboxes, and iPhones in the coming weeks.

I would like to see a few more months of improving economic data before declaring that the train has left the station, but it does appear that we are finally, finally gathering momentum. Remember folks, you heard it here first – all the way back in October…now if Washington can just stay out of the way.

It is my fervent holiday wish for the coming year that the economy continues to gather strength in a sustainable way and that there are more and more jobs for people who don’t have them and want them, especially the long term unemployed. God bless us, everyone!

All the best,
Tom Keoughan

By | December 11th, 2013|ToyJobs Blog|Comments Off on Another Black Friday Disgrace – While Toy Hiring Soars!

Economy and Employment Continue Gradual Improvement

U.S. consumers continued to increase spending in July as the economy continued to grind out a slow but steady expansion. The Commerce Department last week announced that retail sales for July climbed a seasonally adjusted 0.2%. They also adjusted the June growth rate upward from 0.4% to 0.6%.

People are seeing the value of their homes and retirement accounts rise, which has begun to create a “wealth effect.” Also, Americans have spent the last few years struggling to shed debt. Total consumer debt is now 12% lower that at its peak in the fall (just before “the fall”) of 2008. Lending and spending are on the rise, especially for the big ticket items like homes, cars, furniture, and my favorite – barbecue grills.

bbqConsumer confidence is increasing and is at its highest level in years, which economists attribute to the gradually improving employment picture. Toyjobs concurs that, at least in the children’s product business, hiring has increased dramatically. On the jobs front, things seemed to turn the corner in 2012 after three dismal years. In 2013, hiring has been much more robust. Even the annual summer doldrums period has seen more hiring than in any of the last five years. [See Toyjobs Success Stories)

That said, there is a puzzling disconnect behind the rise in overall consumer spending and the weak recent showing of many retailers. Wal-Mart, Kohl’s, Nordstrom’s, and Macy’s last week, posted poor second quarter results and cut their profit forecasts for the year. Aeropostale, American Eagle Outfitters, and Abercrombie & Fitch also lowered their sales and profit outlook.

Part of the problem may be that spending for cars, houses, and home improvement may have eaten up dollars that would have been spent on clothing, accessories, and general merchandise. The hope is that once this pent-up demand is sated that spending will trickle down to retail more broadly. After all, one can only buy so many cars and washing machines before you have all you can use.

Spending Habits

Holiday spending, in the aggregate, can be looked at as one big ticket item which bodes well for toy manufacturers. However, consumers will likely chase sales and hunt for value, thereby causing margin pressure on retailers. The question is will retailers eat those margin hits or will they beat it out of their suppliers in small Bentonville rooms.

On the “good news” side of the ledger, Toys’R’Us, which has been reeling as of late, has announced that it plans to add 100 stores internationally by the end of the year. There will be 19 new or reconfigured stores in the US and a total of 51 stores in China by year end. This is good news for two reasons. First, there will be more shelf space to fill which should translate into more goods sold in to the retailer. Also, it appears that ownership of the private entity is investing for growth rather than backing off after recent poor results. We wish them all the best as a strong Toys’R’Us makes the toy industry stronger.

All told, the economy is slowly gaining ground and increasing momentum like a train leaving the station. That said, we should not forget that we currently live in a bifurcated society. Most people have jobs and, for them, things are slowly getting better. However, U6 (the number of people either unemployed or having to accept only part time jobs) is still at 14%. So while 86% of us are doing alright, at least 14% are still struggling.

Fortunately, increased consumer spending on big ticket items should start to trickle down to improve retail sales as a whole. As this couples with increased consumer and business confidence, it should lead to a much better employment picture. This is already beginning to happen. We should all hope that as the train chugs out of the station and begins to pick up speed that the long term unemployed and the under employed will be able to climb aboard. As employers, we should try to haul them aboard when we can.

See ya’ll in Dallas,
Tom Keoughan

 

PS – Dallas Alert! Dallas Alert! If you want to upgrade your sales team for the 2014 sales season, you better get cracking. You should have started two weeks ago!

By | August 20th, 2013|ToyJobs Blog|Comments Off on Economy and Employment Continue Gradual Improvement

Toy Fair: Return of the Snows

After two snow-free years, the weather hit back with a vengeance at the 110th American International Toy Fair. While New York City itself only received eight inches or so the rest of the Northeast was hit hard by the Snowpocalypse.

Things kicked off Saturday night with the TOTY awards. As always, Carter Keithley and his Toy Industry Association (TIA) team led by Stacy Leistner organized a terrific affair. The food was superb and everyone seemed to be having a good time.

The evening awards program, organized by Jamie Gallagher of Faber Castel and Shirley Price of Funrise was fun and kept everyone engaged. The night belonged to Lego and Leapfrog who each garnered several awards. That said, it was good to see awards won by several small companies such as: Just Play, Plasmart, and Cloud B. The boys category was dominated by Teenage Mutant Ninja Turtles from Nickelodeon/Playmates.

Traffic seemed a bit off on Sunday, most likely due to weather-related travel disruptions. Countless war stories were shared by sleep deprived refugees from New England and Toronto. At the end of the day, action shifted to the Women in Toys (WIT) dinner. Genna Rosenberg and Ashley Maidy again did a great job organizing the annual event at The Lighthouse at Chelsea Piers. The evening was presided over by the always glamorous WIT president Joan Luks and it was good to see an award given to “The Queen of Toy Fair” Gail Jarvis. Particularly fun was the presentation of capes to the award winners.

Confidential sources tell me that someone looking very much like a cape wearing Nancy Zwiers was spotted over the next several days dancing around the Javits Center 🙂 Congratulations to all Wonder Woman winners and nominees.

Toy Fair traffic picked up substantially on Monday and Tuesday. Between bouts of “Javits feet”, Toyjobs was able to pick up on several young, under-exposed companies with exciting product lines. Some of these will undoubtedly be amongst our “sudden surprise” toy manufacturers of the future.

On Wednesday, we headed down to New Orleans for a few 65 degree days of good food, good music, and an evening glass of wine or three. We at Toyjobs will never drink anything out of a large Dayglo plastic toy – nor should you.

On the economic front the toy industry continues to have its challenges. Leftover retail inventory will likely mean that the first half of 2013 will be even slower than usual as little restocking needs to be done. Also, due to the management shuffle at the top, one has to believe that Toys ’R’ Us will be stuck like deer in the headlights for a considerable period of time. In addition, we continue to have a condition of torpor in Washington D.C. – nothing seems to move except their mouths. That said, total retail trade sales continue to trend cyclically upward. Warren Buffet, in last weekend’s shareholder letter said “ignore short term uncertainties, the immediate future is uncertain; America has feared uncertainty since 1776…American business will do fine over time”.

That’s the spirit that we’re seeing from our vantage point. As is usually the case, we were given a large number of search assignments in late December and January but those searches generally don’t close until the toy industry finishes cycling through trade shows in Hong Kong, London, Nuremburg and New York. Here at Toyjobs, we’re expecting to have an excellent
March as companies start to pull the trigger. In addition, search starts have been accelerating since the close of New York Toy Fair. Should this trend continue it bodes well for the industry as a whole. After the usual summer slowdown, I foresee hiring to come back even stronger in the fall as the headwinds of retail inventory and Washington gridlock abate and the economy continues to strengthen. Let us all hope it is so.
More light at the end of the tunnel,
Tom

By | March 5th, 2013|ToyJobs Blog|Comments Off on Toy Fair: Return of the Snows

Brief Rain Delay – Waiting for Takeoff

While the headlines blared “Retailers’ Holiday Sales Disappoint” this was based on same store sales which were up but not as much as anticipated. Those projections seemed to be based on mostly wishing. However, same store sales is a retail metric meant to measure a retailer’s health. If you “make stuff” that you sell through retailers, a more meaningful metric is total sales, which measures all the “stuff” sold in all of a retailers’ stores. If a retailer builds more stores and in total sells more “stuff” as “stuffmakers” it’s not our primary concern that the retailer didn’t sell quite as much as they wanted in each store. We want to know how much “total stuff” of ours they sold.

Same stores Sales increased by 4.5% according to Thomson Reuters but this was skewed upward due to Costco being the most heavily weighted company in their index and Costco knocked it out of the park. Same store sales minus Costco increased 2.8%. Those aren’t break out the champagne numbers, but they’re not too shabby. Total Sales should be up by more. Unfortunately, the best chart I could find only runs through November 2012. New data will be available on February 13 (Click Here For Chart). We will also publish the new chart new chart next month.

The holiday sales season was characterized by heavy online shopping in November and early December followed by strong bricks and mortar purchases at discounted prices during the two weeks leading up to Christmas. Toy sales followed this pattern and were flattish overall with a weak November and strong late December.


Why is this man smiling?

Leapfrog was a huge winner with four of the top ten toys of 2012. Costco, Kohl’s and Macy’s did very well on the retail side. Amazon sales were quite strong but, as always, profitability is suspect. Times were tough for Hasbro who experienced weak holiday results and is planning to cut 10% of its workforce. Toys ‘R’ Us posted poor results both in the US and internationally. Sears/Kmart remained wobbly.

Both TRU and Best Buy accused Wal-Mart of posting online bait and switch ads. They claimed that the retailing giant would run internet ads claiming lower prices but then their stores would have either different models or be out of stock. Wal-Mart’s rather disingenuous response was “our ads don’t claim to compare identical products.” Wal-Mart had been accused of similar tactics back in the old print ad days of the mid-nineties. We’ll have to wait and see how this plays out.

As Toy Executives return from Hong Kong, I’m hearing that while late December toy sales were very strong that they didn’t make up for the rest of the holidays sales season. Retailer’s are carrying too much inventory which is compromising open to buy dollars and little early year restocking will be necessary. This will hurt toy company’s in the first half which has always been a difficult period for them anyway. The other thing I’m hearing is that in 2013 Teenage Mutant Ninja Turtles are going to be huge

Looking forward, we’re a long way off from Christmas 2013 but the elimination of the payroll tax cut could hurt consumer spending since in the current economy many households are living paycheck to paycheck. Europe is in recession which will impact the largest toy companies and smaller ones at the margin. That said, the economy has stabilized and continues to improve. Bipartisan shenanigans in Washington will continue to dampen economic growth during the first part of the year. That, as well as, the European situation and existing retail inventories should cause things to continue to muddle through until May or June. As we move past those headwinds, the economy should gain strength in the second half. I then see blue skies in 2014 although it’s really much too early to make a firm call.

Toy industry hiring should follow these economic trends which, for now at least, seem to match up well with the toy world’s annual business cycle. Look for companies to be cautious but to add where they have to in the first half and regain confidence and increase hiring as the year moves forward. Let’s keep our fingers crossed

Seeing lights at the end of the tunnel,
Tom Keoughan

By | January 28th, 2013|ToyJobs Blog|Comments Off on Brief Rain Delay – Waiting for Takeoff

He’s baaaaaack!…Neil Friedman Returns

After just a few short weeks in “retirement” Neil Friedman has returned to the retail side of the desk by being named Toys’R’Us’ US President. This comes just in time for the upcoming TRU IPO (good for him!). Early in his career, Neil spent ten years at Lionel Leisure before moving to the toy manufacturing side with Hasbro, Gerber and finally Fisher Price and Mattel. He also spent an additional short stint at Lionel Leisure in the early nineties.

The toy industry should benefit nicely by having Neil in such a prominent place at Toys’R’Us which has been looking awfully “Targety” lately. It should certainly be helpful that he understands and empathizes with the challenges that manufacturer/importers face. Congratulations to Neil and good luck to the toy industry which hopefully will find it just a little bit easier to do business with TRU.

Mr. Friedman’s alma mater, Mattel, just lost the most recent round in its “total war” with MGA. Most toy industry executives that I have spoken with are absolutely flabbergasted. To hear MGA Chief Executive Isaac Larian crow “After seven years of fighting with Mattel, I’m finally vindicated” reminds me of Ollie North saying “I’ve been completely exonerated. It seems that Mattel and MGA are now tied at one and one with one “do over”. So what happens next? Appeal? Jumpball? Tiebreaker?

From my reading of the case (which is admittedly far from complete) it seems clear that Carter Bryant created the original Bratz drawings on Mattel’s time and dime. It seems equally clear that Mattel turned the concept down internally (oops!). That’s completely understandable. We’re in a fashion business and much of product selection is just guessing at what a very fickle group will decide they must absolutely have usually for a very short period of time.

I, of course, haven’t read Carter Bryant’s Mattel contract but I do know (as does everyone in the toy industry) that these contracts are meant to cover all intellectual property developed day or night or weekend while in a company’s employ. Both Carter Bryant and Isaac Larian must have known that in producing Bratz, they were on a very slippery slope whether there was some loophole in the Bryant/Mattel contract or not. On the other hand, it is also very clear that MGA overwhelmingly built the Bratz franchise through smarts and hard work.

So, what should be done? This isn’t the way “the law” reads or the way contracts were written but it I were King Solomon…First, no damages for anybody. I would guess there was an adequate amount of “stolen trade secrets”, dirty tricks, subterfuge and just plain smarmy behavior by both combatants. The original concept was probably technically owned by Mattel but the business was built by MGA. So Mattel should receive the highest customary inventor’s royalty paid in some sort of split by MGA and Carter Bryant who surely knew he was violating the spirit if not the letter of his contract.

I’m not particularly happy with that opinion. I am decidedly not an MGA fan but in trying to be impartial that’s where I come out. It’s just one man’s opinion admittedly based on a very limited reading of the evidence (mostly newspaper stories). If I had more first-hand access to the evidence, my opinion might be different. So please, there’s no need for huffy phone calls from either the Mattel or the MGA camp. You both need to focus on the next round of your battle (and I’m predicting there will be a next round).

On to more broadly important matters. Last week we learned that US manufacturing output has been rebounding at an incredibly fast rate. During the first quarter it increased at an annual rate of 9.1% compared to an estimated growth rate of about 2% for the US economy as a whole. This is due to a number of factors. In 2010 most large companies postponed purchases in order to hoard cash. Now that the deer in headlights portion of the crisis is over and the recovery has slowly begun, companies are beginning to spend to satisfy pent up demand. Large increases in corporate spending for computer and software upgrades are being seen.

Another reason in commodity inflation as US companies seek to jump on the bandwagon of rising prices and growing sales volume. Food price inflation is boosting spending world-wide on agricultural equipment. Globally rising metal and oil prices have encouraged spending on mines and oil and mineral exploration requiring additional equipment. As freight traffic grows, trucking firms are investing in vehicles with better fuel efficiency.

All of this heavy machinery will require additional people to build it. Additional workers will mean increased spending on consumer products and consumer products firms will need additional employees to fulfill demand. When the manufacturing sector does well the rest of the economy generally follows. The whole shebang is beginning to snowball albeit very slowly. Indeed in March, the unemployment rate edged downward in its fourth consecutive monthly decline. I’ll be leaving tomorrow to attend a Pinnacle Society conference with the other Big Dogs of Recruiting. It will be interesting to hear how employment is fairing in all of their various niches.

There are, of course, a few concerns. One is that the recent earthquake in Japan will lead to shortages of automotive parts, semiconductors and electronic components. That could slow production of some goods but thus far the effect seems to be relatively minor. A bigger worry is a spike in oil prices due to Middle East unrest. Saudi Arabia has enough spare oil capacity to offset almost any Middle East problems short of someone going to war with Iran (which doesn’t seem likely). The biggest danger would be if Saudi Arabia itself sank into crisis. If that happens…well, let’s just hope it doesn’t.

Toyjobs continuing forecast is for increased toy industry hiring of specific and necessary jobs and an increase in sales to toy retailers. Unfortunately, due to China’s slowly strengthening currency, rising labor costs, rising commodity prices and general inflation – we foresee lower margins. Things are so much better than they were a year ago but in 2009 the economy sank so low that it’s still not even close to normal.

 

All the best,
Tom Keoughan

By | April 27th, 2011|ToyJobs Blog|Comments Off on He’s baaaaaack!…Neil Friedman Returns