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Fall Toy Preview: Upbeat and Productive

As I flew toward Dallas reading the Daily Doom & Gloom, I had a sense of trepidation about what the mood at the Fall Toy Preview might be. I’m happy to say that I was pleasantly surprised as everyone was pretty upbeat (it’s slinky, it’s slinky). That’s not to say that anyone was “irrationally exuberant” but I didn’t see all the slump shouldered long faces of a year ago.

At times the traffic seemed to be a little light until I realized (doh!) that this was a “by appointment only” show and that everyone was stuffed into their little cubicles having hopefully productive meetings (It’s slinky, It’s Slinky). There weren’t supposed to be a lot of people just milling around (like me). With the exception of Tuesday morning, most companies had full dance cards and all of the major retailers were well represented. The show was “player dense” with only serious toy companies showing and only serious customers showing up. In summation the Fall Toy Preview was upbeat and productive.

As the showed ended, I snuck off to Austin for a few days of good food and good music under the guise of awaiting the September jobs report. The report was better than expected as the US economy added 103,000 new jobs raising hope that a “double-dip” recession will be avoided. The alarming jobs data from July and August were also revised upward. It seems that instead of collapsing after the summer’s debt ceiling fiasco, the job market appears to have weakened slightly and is now beginning to rebound, albeit slowly.

There are 1.4 million more people on nonfarm payrolls than there were a year ago. That sounds good but it comes to an average of just little over 100,000 per month, which is nowhere near large enough to get the economy really growing again. In addition, Toyjobs favorite labor statistic, U6 (which includes people who have given up trying to find work as well as those working part time out of necessity rather than choice) has surged to 16.5% – its highest level this year and from a low of 15.7% in March. So, things are improving but at a very slow rate.

What’s holding us back? In a word – uncertainty. We are having a slow and very fragile recovery but there are lots of icebergs around. The tricky thing about icebergs is that even if you can steer around what you can see, no one knows what’s under the surface. The press is pumping us daily doom and gloom about the European debt crisis. In reality this doesn’t affect the Main Street economy all that much. In fact, through the summer, retail sales have continued to slowly advance. It does affect the big money center banks who in their usual style – chased yield – and bought bonds from places like Greece(?) and Italy(?) in order to capture a few extra points of yield for their “safe” bond portfolios. In their Wall Street way they have done this in huge amounts with large amounts of leverage. Sound familiar? Needless to say the large European banks are up to their eyeballs in this junk. So, while this may not affect the Main Street US economy today… if it all falls apart then everything goes kerblooey!

The usually sober Senate led by the serial idiocy of Senator Charles Schumer has recently passed a currency bill aimed at China. The legislation was widely opposed by companies that do business with China. Small consumer goods companies, like toys and juvenile products, know that this sort of thing will make their manufacturing costs go up and their margins go down. Large companies selling to China (GE, Boeing, Bechtel) are afraid that even if it doesn’t start an all out trade war that: “They’re going to start f–king with us”. But the Senate was determined. Stated Schumer: “We’ll shoot ourselves in the head if we have to!” Could it be? That it’s all electioneering? That the Chinese government rarely votes in US elections? That Senators are just beating their chests because they know the bill won’t pass the often less sober John Boehner and the usually less rational House? And that nothing will really happen? No. That sort of thinking is just way too cynical.

“Now hold on. There’s plenty of Senators stupider than me.”

Uncertainty. Uncertainty has been the theme song (Joe Biden as the Skipper. Guess who plays Gilligan) of the Obama years (not that it’s all his fault). Businesses still don’t know what their taxes will look like or what their regulations will be. Just last week the Obama administration threw out part of their own probably never to be implemented health care bill (the long term care portion). Business cannot confidently make plans to invest in people or products without knowing what the playing field will look like. It is unlikely that things will noticeably improve until the next election. Of course if Michelle Bachmann is elected then all bets are off. That said, I do believe that there is reason for optimism.

Toy Industry search starts, which jumped ahead in August, have grown at an increasing rate. (IT’S SLINKY, IT’S SLINKY). Please follow our job board in the coming weeks as we expect lots of new postings (or sign up for our RSS feed to be alerted of all changes instantly). Companies seem to have realized that they need to plug some holes and add some talent, but there is a little hitch. Here at Toyjobs we are able to find our clients the people they need quickly and efficiently. That said, we have repeatedly been running into situations where companies quickly determine who it is that they want to hire, but then stall when it comes time to pull the trigger. Sometimes this goes on for months and I’ve seen it drag on for long as ten months. We have had a couple clients lose out on their chosen person because they waited while another company acted.

I’m guessing that many companies just don’t realize what goes on in a candidates head when they’re chosen but then made to wait…. They wonder. They wonder if there is some objection you have to their background that you are not telling them about. They wonder if you are “dating” other people and maybe they should just move on. They wonder if there is some financial problem at your company which constrains you from hiring them. They wonder what it would be like to work for your company if they need a quick decision in order to get something done. They wonder about all of these things and pretty soon they begin to have doubts and the romance is gone. The bloom is off the rose.

I am NOT advocating that companies rush into hiring anyone but many companies know very well that they are taking an inordinate amount of time between first interviewing a candidate and actually pulling the trigger and making them an offer. Remember that the best people are also being courted by your competitors and if they can be decisive and come across as a dynamic get it done organization, they are going to attract and return the best talent. Remember the old adage – Time Kills Hires.

Everyone knows it’s slinky

Tom Keoughan

By ToyJobs|2020-11-20T08:51:02-06:00October 19th, 2011|ToyJobs Blog|Comments Off

From the Yuan Wars to Toy Company Jobs

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

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

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

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

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

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

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

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

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

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

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

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

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

Still Muddling Thru,

Tom Keoughan

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

By ToyJobs|2020-11-20T08:51:04-06:00September 22nd, 2010|ToyJobs Blog|Comments Off

Revaluing the Renminbi and a Toy Jobs Turnaround Begins

Much of the news chatter over the last month has been about the pressure being put on China to revalue the renminbi. While it can easily be argued that China is manipulating its currency, there will be losers if the yuan begins to rise.

One major loser will be companies selling consumer hard goods in the U.S. (we don’t buy much food from China). If the renminbi rises it will cost more U.S. dollars to produce goods in China. That could mean higher prices for American consumers at a period in time when they can ill afford it. Another scenario could see Wal-Mart and its retail brethren holding their price points firm thereby squeezing the margins for U.S. consumer hard goods makers. U.S. companies will then try to beat the difference out of Chinese factories that are already operating on razor thin margins. Arguably, this was a major contributing cause for the product quality problems of 2007.

While American politicians are naturally jabbering about jobs during the current period of high unemployment; the reality is that a rise in the yuan won’t help U.S. job growth as much as advertised. China is the final assembly point for the global economy. If the yuan rises that will increase its purchasing power making it that much “cheaper” to buy natural resources and components from Korea, Malaysia, Australia etc. That will make manufacturing in China even more attractive. On the other hand, thousands of U.S. consumer goods companies may have their margins squeezed making it that much more difficult for them to hire additional employees.

The Obama administration has said that it wants to double U.S. exports over the next five years with a particular emphasis on large developing countries especially China. Since China doesn’t currently have a very large consumer economy that means we’re talking about great big stuff – infrastructure projects that benefit the likes of General Electric, Caterpillar and Bechtel. Certainly global behemoths like these are capable of making larger political donations than ABC Toy Company. Coincidentally(?), they also tend to have large unionized workforces. It’s above my pay grade to say whether we should pressure China to stop manipulating its currency or trade sales and marketing jobs for union jobs. I’m just saying that there will be winners and losers. That’s the way the world rolls.

Meanwhile, back on the unemployment front; the job market is showing signs of life. Employers added 162,000 jobs in March, but almost one third of the growth came from the government hiring temporary workers for the census (in order to pave the way for the next round of gerrymandering?). While the headline unemployment rate (U3) has remained flat at 9.7% for the last three months; U6 (which includes the underemployed and discouraged workers) has started to creep upward from 16.5% to 16.8% and finally 16.9%. This is mainly a result of people who previously weren’t even bothering to look for work who are now beginning to restart their job searches as they begin to feel that the climate is getting a little bit better.

Indeed, there’s a good chance that we’re at the inflection point for unemployment. Increased demand on top of steep cost cutting (people) during the recession has meant a swift rebound in corporate profits. The level of profits economy-wide remains below the 2006 peak but accelerated sharply late last year. In the third quarter after-tax profits jumped 12.7% from the prior period. It is widely thought that when we get the government data, there will be similar strength in the fourth quarter of 2009 and in the just ended first quarter of 2010.

A recent surge in the hiring of temporary workers, often a precursor to full-time positions, also bodes well. Employment of temps has jumped by 248,000 since October; a 15% gain that is one of the strongest rebounds ever.

UPS, Federal Express and many trucking and rail companies have seen business activity picking up sharply. UPS reported last week that during the first quarter not only had their international business grown rapidly but that US domestic volumes grew for the first time in two years. Transportation activity has started to turn but remains well below previous levels meaning there is significant room for expansion. That seems to indicate that manufacturers and retailers (!) are still far from completing inventory restocking.

In March, the consumer seems to have rejoined the party. Consumers have shed an increasing amount of debt through defaults and government incentives for banks to forgive mortgage principal. Economists now expect consumer spending to grow at an annualized rate of 3% in the first quarter. In March there was a 1.6% surge in retail sales as shoppers turned up in surprising numbers at stores, auto dealers and restaurants.

Anecdotally, just as spring weather suddenly hit us in the second week of March, too the job market seemed to blossom as our phones started ringing off the hooks with companies inquiring about new search starts. All this is very hopeful but we can’t eat hope. Most of the toy company executives I speak with are feeling pretty good about 2010 but they remain cautious. They “think” that they’re going to have a pretty good year but they won’t “know” it until August/September. That is traditionally a time when hiring jumps in the toy industry and I expect a big pickup in activity then. In the meantime, while the climate is certainly not good; things are getting better faster. KGOY? TGBF!

Still cautiously muddling thru but breathing a little easier,

Tom Keoughan

By ToyJobs|2010-04-20T10:00:29-05:00April 20th, 2010|ToyJobs Blog|Comments Off

The Consumer Electronics Store that Stole Christmas

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

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

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

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

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

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

See you at the October show,

Tom Keoughan

By ToyJobs|2006-10-03T09:00:19-05:00October 3rd, 2006|ToyJobs Blog|Comments Off

Washington Socks It to the Toy Biz

Just when you thought it couldn’t get any worse they’ve gone and devalued the yuan. Washington politicians may have scored a few points with an undereducated public but it is the consumer, and American import businesses, who will pick up the tab.

This year’s manufacturing contracts are already set so the effects may not be immediately apparent and although a 2% devaluation may seem like small change, many experts are forecasting a devaluation of between 8 – 11% over the next eighteen months. With Chinese factory costs for labor, electricity and everything else going up, coupled with continuing sky high resin and transportation prices that money is going to have to come from somewhere. In a “perfect world” those costs would be passed on down the line from factories to importers to retailers and ultimately to the American consumer; in other words – inflation. What will happen in the real world is likely to be just a little bit different.

With Walmart’s sales being pressured by high oil prices as well as owing to their generally rapacious nature, it’s an easy bet that they will not raise their price points. It’s a little difficult for me to believe that I would decide not to buy a shiny new widget if it cost $7.99 rather than $6.99, but I guess that’s why I still have to work for a living. All of those extra widget dollars eventually add up.

With major retailers standing firm it will be between the importers and the Asian manufacturers to battle it out for their already shrunken profit margins. This will lead them to (and this could be Walmart’s new advertising slogan) “Make do with less!” (Ahem – sort of like Walmart store employees.) The other course will be to remove pieces and features, use cheaper materials and thinner walls or move manufacturing to Northern China where labor and electricity are cheaper. For consumers this means less creative, shoddier products with more safety problems that won’t last as long. Thank you, Walmart!

An example of the new and improved World Friendly Walmart is seen in West Virginia where workers have been ordered to be available to work any shift at any time or face dismissal. This “open-availability” policy states that “workers who cannot commit to being available for any shift between 7 a.m. and 11 p.m., seven days a week, will be fired by the end of the week.” So much for daycare, elderly parents, little league games, doctor’s visits, dance recitals, families, communities and anything resembling life as we know it.

In our ever diminishing Department of Good News; California ports have extended their hours and weekends so that all of the goods imported through there should reach their destinations in a timely fashion. Unlike Walmart employees, dock workers belong to a union which will guarantee them monetary compensation for working odd hours as well as some semblance of a regular schedule.

My summer reading has included James Stewart’s book, Disneywar — although I’d be a little careful about carrying a copy around Southern California. An alternate title might be Unwarranted Arrogance and Self Puffery for Dummies. It seems that Disney’s success in creating enduring properties for children can at least partially be explained by the fact that the company is managed by children – very badly behaved children (and I’m talking senior management as well as past and present board members). For those who enjoyed this tome I’d like to recommend William Golding’s, Lord of the Flies, as further reading. An illuminating alternative analysis of Disney’s recent courtroom escapades which I copped from the Wall Street Journal editorial page follows.

The days are growing impeccably shorter and summer fun is almost over so it’s time to dust off your crackberry’s, buy new batteries for your laptops and cell phones and get ready to run another weary lap on too little fuel and too little sleep.

Fall Toy Preview is just around the corner.

See you then,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:05-06:00August 24th, 2005|ToyJobs Blog|Comments Off