Rosy forecasts but weak real world numbers make for uncertainty
Early forecasts for Holiday Spending 2015 have been quite optimistic. Households have been enjoying fatter wallets, thanks to lower gasoline prices and cheaper imports, thanks to a stronger dollar. Retail sales reflected this by growing from January to July. NPD has reported that toy sales were up 6.5% in the first half and is projecting 6.2% growth for the year as a whole. The National Retail Federation is forecasting a holiday sales increase of 3.7%. That sounds good but less so when you consider last year’s 4.1% gain.
Forecasts are fun and they can be helpful, but let’s not ignore what’s going on in the real world. A retail sales slowdown began in August and the Commerce Department recently revised the growth rate down to 0.0% for the month. September retail sales numbers were not perceptibly better with only a 0.1% growth rate. While low gas prices have been increasing disposable income and the strong dollar has led to some price deflation, consumers have been channeling additional spending toward services such as vacations and restaurant meals. Before we get pessimistic, let’s keep in mind that for economic data, some months counts less than others. August is rarely a good indicator – it’s summer! And September can often be a transitional month, especially when Labor Day arrives late, as it did this year.
Weak Jobs Reports
Concurrent to the slow-down in the retail sales is what we’re seeing in the job market. While job creation was strong in the first six months of the year, in September there were only 142,000 net new jobs. The numbers for July and August were also revised downward so that the third quarter monthly average for net new jobs was 167,000. That’s down from a monthly average of 198,000 for all of 2015 so far, which is down from 260,000 a month in 2014. While we should be concerned, again let’s not get overly pessimistic quite yet. Third quarter job gains have a historical tendency to run below average for the year and the deceleration often turns out to be temporary, rebounding in the October to December quarter. Again – it’s summer! …I’m going to wait for the October numbers before I really try to figure out what’s going on.
The big news last week was Wal-Mart. The retail behemoth said that, while sales would be flat, earnings could fall as much as 12% next year. The lower margins will be the result of “investments” in staffing at US stores and actual investments in ecommerce. When Wal-Mart experiences margin pressure – “Let the vendor beware!” – that can only mean bad news for its suppliers. Already they are asking all suppliers to pay fees to keep inventory in Wal-Mart warehouses and in some cases, they are strong arming vendors into accepting extended payment terms. One can only imagine that there will be more of this type of thing to come.
Strategically, changes needed to be made. Wal-Mart was falling behind in the retail wars. It’s difficult to compete with a company like Amazon, which is apparently comfortable not making any money for more than twenty years. From a timing standpoint, this makes perfect sense. New CEO Doug McMillon is a lifer who enjoys broad support. He is relatively young and will probably be in the CEO chair for another 10-15 years. He will be able to chart the new lows as his starting point as he goes about setting new strategy and rebuilding the retail juggernaut. He certainly has the time and resources to turn things around, but he has to get the strategy right. Not that he’ll notice, but we at Toyjobs wish him the best of luck.
Putting together a strategy to right the Wal-Mart ship is way above my pay grade, but I do have just one little question – we hear a lot about a “seamless customer strategy” and “click and collect” where a consumer can buy online and then stop by a store to pick up their purchases. My question is – why would I want to do that?? When I can simply purchase online and have my items delivered to my door. Just sayin’.
Dallas Fall Toy Preview
I found most people at the Dallas Fall Toy Preview to be very optimistic. The Frozen phenomenon seems to be fading fast butShopkins has been and Star Wars soon will be taking the world by storm. Wicked Cool had a very strong looking product line and over at the Auldey RC booth, people were busting through the doors.
Certainly there were the usual complaints – “Why are we here?” and “This place is empty.” But, when I asked manufacturers if their dance cards were full, they almost unanimously answered “yes.” In fact, in a completely new trend, instead of ambling in late, buyers were arriving for appointments early – even a day early. It seems that everyone wanted to get out of town as quickly as possible. I’m guessing that Thursday was completely dead, but can’t really tell you because I had already left for Austin to enjoy a much deserved long weekend of good food and good music.
October continues to be a crazy time in the toy industry with buyers and manufacturers pinballing between Dallas, LA, and Hong Kong at an accelerating rate and with even more disjointed schedules than ever. I know more than a few execs that will be in all three locations (simultaneously?) this month. The TIA still needs to figure this out. Things are getting messier, not better.
Navigating Conflicting Signals
What do we make of all of this conflicting noise? Should we try to make sense of things or just bury our heads in the sand? I feellike I’m crossing a deep river barefoot and just feeling around for smooth stones with my feet. Not that anyone listens to me but I am going to acknowledge, but not put much faith in, all of the conflictingsignals until I see the October numbers. Historically, October is a solid bellwether month. I’m optimistic but am going to be conservative in planning and spending until things actually happen. I think that there’s going to be an absolute ton of Star Wars merchandise sold but I also think there will be an awful lot of it left on the shelves. What then? “Curb Your Enthusiasm” and don’t become “Irrationally Exuberant.” It’s likely to be a strong holiday shopping season, but at this point that is far from certain. Be prepared for the aftermath. I am filled with both optimism and uncertainty and I’d prefer to be surprised on the upside.
May the force be with us,
image via Crowdfundinsider.com
Toyjobs has finally collected on its personal fraud suit vs. Ivars Sondors who is now operating under the moniker “Storm Sondors.” The case began in 2007 with Toyjobs winning a judgment case against Sondors’ company A-HA Toys in November 2008 and being awarded a judgment against Ivars Sondors personally in August 2011.
Toyjobs President, Tom Keoughan said: “We’ve chased Mr. Sondors for eight years across three continents. It’s good to finally collect what is owed us and put this matter behind us. I’ve got two big boxes of paper to throw out.”
Keoughan further states: “I have no way of knowing how he’s handling himself now, but it has been my experience that people over the age of forty don’t change much.”
While the toy industry saw strong search starts in the first quarter, a lot of hiring decisions were postponed due to the uncertainty caused by the weak economic and retail environment. Starting in Q2, we were rocking and rolling again. Search starts continued at a good pace, but now previously delayed hiring decisions were being made.
In July, toy jobs continued to be filled, although, as usual, search starts slowed due to seasonal factors. For the second straight year, search assignments restarted during the final week of July. I’ve been saying it for a long time, but it seems that toy companies have finally started to realize that if they want to add new members to their teams in time for the Fall Toy Preview, they have to start looking well before Labor Day.
From where I sit, toy industry hiring looks to be strong through the end of the year and beyond. NPD has recently reported that toy sales improved by 6.5% in the first half. They also project an increase of 6.2% for the entire year. This will be the strongest growth in the toy industry has seen in decades. Several hot properties and product lines have been leading the charge, including: Frozen, Shopkins, Minecrafts and Paw Patrol. Coming soon will be an all-out blitz by the Star Wars franchise.
Strong sales growth should create confidence in toy companies, which should in turn instigate their desire to grow. In particular, look for rivals to try to continue to bite off shelf space from still staggering Mattel. All of this growth will necessitate an increase in staff. I look for renewed toy industry confidence to spur hiring through the end of this year and into the next. May the force be with us.
All the best,
US GDP contracted at a 0.7% rate during the first quarter. That was certainly no surprise here. As I reported last time, even though there was a flood of search starts early in the year, companies didn’t seem to be pulling the trigger even once they found the candidates that they wanted to hire.
During the current recovery, the US economy has established a pattern of weak first quarters. This time, economists are chalking it up to a triple threat of awful winter weather, a strong dollar, and the labor dispute at West Coast ports. Hopefully things have starting turning around. Here at Toyjobs, we have noticed that companies started actually hiring people beginning in late April. Search starts have been strong all year and we
expect that to continue, albeit with a slowdown during the summer doldrums of July. In August and September, I expect both search starts and hiring to reaccelerate as firms begin preparing for the 2016 selling season.
Lastly, Toyjobs would like to join the entire toy industry in honoring Carter Keithley. From the time he came in, Carter
took a barely functioning and (let’s just say) “controversial” organization and turned the TIA into a top flight industry association which everyone respects. Carter always lent an ear to everyone and, as many of us know, Carter was fun. Heh, I find myself chuckling about the “was” because I’ve heard Carter say on several occasions: “I’m not dying!” True,
but he’ll be around a lot less and I, for one, will miss him.
Sincerely, Tom Keoughan
I would like to thank everyone for their outpouring of support during the Obvious Huckster in Ohio (OHiO) ruckus. I don’t like being put into that sort of situation, but sometimes you have to take a stand or things will just continue or get even worse. We haven’t heard a peep out of OHiO since, so it seems that the possibility of further exposure has given him some degree of restraint. Hopefully, his behavior has been permanently altered and we can all just get back to work. Thanks again for your support.
By now I’m sure that most of you have heard about the sharp deceleration in March hiring after a long string of strong jobs reports. Non-farm payrolls slowed in March to a seasonally adjusted 126,000, the weakest hiring in 15 months. Hiring estimates for both January and February were also revised downward.
My gut feeling is that things are not as bad as that report indicates, despite the press running around crying that “the sky is falling.” After all, bad news sells. The US has had a number of soft first quarters in recent years. I haven’t been able to come up with an explanation for that phenomenon that I’m satisfied with yet. Lots of correlation but unconvincing causation. Here at Toyjobs, we don’t just make stuff up but it’s still important that we recognize the pattern.
There have been lots of layoffs recently in the oil and oil service businesses and certainly that is a factor. And, for the last two years, first quarter winter weather has been horrible. Last month, job growth in construction and leisure and hospitality, two of the most weather-sensitive industries, slowed by about 90,000 jobs. Days when the office is closed due to weather also takes a greater toll than it is generally given credit for. There are the snow days themselves and then there are the next few days of playing catch up. Yes, I know everyone claims that they can get all the work done or are even more productive from home but we all know that’s not entirely true, don’t we? This means multiple days taken away from interviewing and decision making all of which pushes actual hiring down the road.
In the toy industry it is not unusual for hiring to be slow in January and February as everybody hits the road for the global trade show circuit. There is no time to interview and make decisions. A lot of companies also decide on whether to create jobs based on trade show and early year sales results. Hiring can slow even as search starts increase.
That’s what we’re seeing this year. Here at Toyjobs, after an extremely strong fourth quarter, first quarter placements have been slow as search starts have been soaring. If both unemployment figures and search starts had gone into reversal, I would be concerned that the US economy was faltering. That has not been the case. Search starts have been quite robust and those searches are now beginning to come to completion. Many will be completed in April and May – a few weeks later than usual. This leaves me optimistic that poor first quarter jobs numbers represent a delay rather than a long term slowdown and that we are thankfully about to experience a rebound.