Toyjobs Blog

I hope everyone is enjoying a strong Holiday Sell-Through Season. After the misery of 2023, current year sales seem much improved. The National Retail Federation is expecting holiday spending to reach a record high. Even though shoppers are weighed down by higher prices for necessities such as food and car insurance(!). Walmart and Amazon had record-breaking sales on Black Friday and Cyber Monday. Discount chains like T.J. Maxx are also doing well. That’s an indicator that consumers are willing to spend when they see the right products at reasonable prices. If you are a higher priced retailer then times are tough. If you are Target, you just have to hope that people are picking out something extra when they come in to buy their Taylor Swift Sparkling Typo Dream Book. It appears that while not “great” this year will turn out much better than last. Some companies will break through and have very good years but most will at least be able to breathe a sigh of relief.

That leaves us thinking about next year and if there is a single word that captures the year to come it is – Uncertainty. The incoming Trump administration has been threatening tariffs – “Big, Byootiful Tariffs.” Of course, there is a difference between “campaign speech” and governing action.

Trump has been known to bluster and blow only to partially dial things back later. I’ve always seen him as a guy who won’t split the sandwich with you. Rather, he’ll loudly demand three quarters of it in the hopes that he’ll get two thirds. Putting tariffs in place won’t be his goal but rather will be a negotiating tool used in order to achieve certain trade and foreign policy objectives. That may be alright in the long run but what does it mean for us in 2025? Trump is not even in office yet and we have already seen Canada and Mexico start to fold to his demands. China, on the other hand, is likely to take a much harder line. China has a range of measures it can use if it decides to retaliate. It can restrict exports of critical minerals or pharmaceutical precursors. It can punish U.S. multinationals’ Chinese operations, sell off U.S. Treasury bonds or devalue their own currency. That said, they are also vulnerable due to what is currently a very weak domestic economy, which has been caused by the bursting of an enormous real estate bubble.

What will Trump do? Early on in his campaign he talked about 60% tariffs on China which would be catastrophic to both the U.S. and Chinese economies. He seems to have dialed that back and is now talking about an additional 10% tariff on Chinese imports. Something like that could probably be partially distributed throughout the supply chain…partially. We should also note that tariff threats are likely to be rolled in slowly. If we look at the last Trump administration, tariff threats were made along with a target date leaving time to negotiate. Last time we also saw target dates repeatedly postponed. Will that happen this time? Who knows? Last time around the toy industry was able to duck tariffs altogether for several years. Will we be able to do the same on this go ‘round? Who knows?

The third leg of the uncertainty stool is the big retailers. Will tariffs be passed on to the consumer? Or will retailers hold their price points firm? How firm will they hold those price points? How much will they be willing to participate in the distributing tariff costs through the supply chain? I expect not much.

Toy companies are left waiting for three actors to make decisions before we can react. What will Trump do? We know that Trump likes to be unpredictable. How will the Chinese respond? Probably in a more incremental way but with a hard line approach. How will the major retailers respond to the whole mess? Probably, they are the easiest to predict. Each actor has multiple choices and when we multiply that by three we get a large number of possibly permutations. It’s sort of like a game of four-dimensional chess. Uncertainty.

Stay nimble, my friends.

Happy Holidays!

Tom Keoughan

Let us start with a quick review. 2023 was a very difficult year for toy and other consumer goods companies due to a severe inventory glut. That left toy companies with less cash on hand entering into 2024. High interest rates also meant that companies were reluctant to borrow any more than they absolutely had to.

Early in 2024, the industry responded by tightening it’s belt. Large companies were engaged in major layoffs but at the same time many small and medium companies continued to hire. When we came to July, that hiring came to a screeching halt.

Shortly thereafter we entered the elongated LA Toy Preview Marathon. I’m going to qualify the following by stating that I did not attend so these observations comes from numerous attending toy executives that I have spoken with. Opinions were very divided with many attendees reporting that they were quite enthusiastic with the event while numerous others described it with a ten letter word that begins with cluster_ _ _ _.

It was almost universally felt that the whole thing was just way too long. Some were pretty disappointed by what I will call Pasierb’s Final Fumble. It seems that the Toy Association held all of their major events during a week when there were no buyers there: Oopsy!

Fortunately, most people were confident that the ever-affable Greg Ahearn, who has a long toy industry history and many strong relationships within the industry will be able to make great improvements. That said, while I agree that he will be able to improve the situation, I fear that he faces an insurmountable obstacle. Major power players in the industry simply don’t want to cooperate. Mattel, MGA, and some of the large LA-based companies don’t want to show their wares to buyers at the same time as their smaller, nimbler, and more creative competitors. When the toy industry sets their dates, those larger companies can simply change theirs. Add to that the largest retailers Walmart, Target, and Amazon all seem to want their own weeks. This leads to a lot of downtime, heightened expenses and running back and forth for the industry as a whole. Although there are a lot of competing interests, I am pretty sure that Greg Ahearn can shorten the 6 week marathon but…can he bring it in at under 4 weeks? I’m not so sure.

On the hiring front, I have been *predicting* (hoping) that after the shows, toy manufacturers would getback home and crunch their results. They would then look at the calendar and realize that if we start looking for people now, we can start them in the next calendar year and on next year’s budget. Sure enough, during the first week of October, my phones began to ring.

I have optimism for the holiday sales season as I notice that, despite high credit card debt, retail sales and spending has continued to grow. I do take note, however, that consumers seem to be looking for bargains which will likely crimp margins. Christmas, once again, will come and increasing retail spending should lead to increased hiring.

The pandemic’s ripples continue to get smaller but they are still with us. It’s never smooth sailing for the toy industry. Every year poses a new and exciting challenge for this industry of ours. In 2025, we will likely kick off the year with the return of the East Coast Dockworkers Strike. That’s just for starters.

Cautiously optimistic,
Tom Keoughan

Mixed signals behind us.  Mixed signals ahead.  Mixed signals all around.  On the one hand, job growth has been weakening for a while and last week was strongly revised in a downward direction.  Credit card debt and defaults have grown to a very high level and that debt is at sky high interest rates of around 23%.  Many companies led by Home Depot, McDonald’s, Macy’s and Disney have sounded alarms about weakening consumer spending after years of pent-up pandemic demand.  On the other hand many lower cost retailers like Walmart, Target and T.J.Maxx have been hitting it out of the park.

image via newyorkfed.org

Many prognosticators (beware the fortune tellers) are saying that we’re on the cusp of a recession but then they’ve been saying that for years.  If the downturn didn’t happen 18 or 24 months ago, why should we expect it to happen now.  I suspect that consumers are “trading down” and looking for bargains. And why not?  After 20 plus percent cumulative inflation during the last four years; today’s bargain is yesterday’s normal price.  What’s going to happen in the future?  A reduction in the interest rates would be welcome but anybody who tells you that they know what the future will be, isn’t being truthful.

What does that mean for toy industry hiring?  Since Covid began I’ve been using the allegory that the pandemic was like a big rock thrown in a quiet pond.  I’m sticking with it.  Over time the ripples have been getting smaller, but the ripples are still with us.  Last year the ripple was an inventory glut which in turn was a reaction to the previous year’s inventory shortage.  Due to the glut, retailers bought much less merchandise as they already had a backlog piled upon their shelves and in their warehouses.  Toy manufacturers had goods piling up on their shelves too.  That meant they either had to blow it out rock bottom or pay to store it as much of it potentially lost value.

In the first six months of 2024 the toy headlines were all about major layoffs and reorganizations at the largest toy companies.  A few noteworthy companies were sold as well.  That said, many small and medium-sized companies were hiring.  Not hand over fist hiring but looking to add one or two key players.  Starting in July, toy industry hiring slowed considerably.  I see three potential explanations for this, and I think it’s probably a bit of each.

First, since toy companies didn’t sell as many toys last year, their annual pay day in January and February was much reduced.  That began to pinch by mid-year and companies were reluctant to borrow a lot of money while interest rates remained high.

Second, it’s summer!  Hiring Is typically dead in July.  People are away on vacation.  Toy executives go into hiding as they hope retailers won’t cancel orders at the last minute, etc.  That usually rebounds in August as inventory makes its way to retailers, and toy companies suddenly realize that in early October the following year’s sales cycle will begin with Fall Previews.  If they want to change or add to their sales teams, they will have to move FAST!  This year that August rebound hasn’t happened.

Which leads us to our third explanation.  The trade show schedule has changed.  The new “streamlined” Fall Previews have become a six-week marathon (longer if you’re going to Hong Kong) of toy people rushing to and from Los Angeles.  I honestly don’t know how anybody gets their work done.  I suppose hotels are happy to keep laundering the same shirts at peak rates.

Hopefully, as things begin to settle down in October, companies will put together their forecasts.  They’ll see that 2024 won’t be a great year but it will be better than 2023.  They’ll see that the pandemic ripples while still there are continuing to recede and business will continue to improve in 2025.  New calendars will arrive and they’ll come to realize “that if we start hiring searches now, we can start them in the new year and on the new year’s budget.”

That’s my hope.  What is my prognostication?  I don’t have one other than a piece of advice which some may find helpful and others will not.  Take a stance of being optimistically cautious which is one notch below my usual cautiously optimistic.  Things are moving rapidly in all directions right now and it’s impossible to read them accurately.  Keep your weight on your back foot but ….. Be Ready To Be Nimble.

All the best,
Tom Keoughan

The wild world of toy industry hiring is as crazy as ever. While the headlines are all about layoffs at the big companies, the small and medium-sized companies have been hiring hand over fist. Beginning in February, Toyjobs has been running at mach speed just to keep up with demand. Consequently, we have helped many clients upgrade their staffs and helped many toy industry inhabitants improve their situations and career prospects.

image via basicfun.com

It’s been good to see a surge in hiring for product development positions. This indicates that company are emphasizing the development of new product lines. We hope this will lead to growth after a difficult environment in 2023. There has been a particular emphasis in hiring product developers and designers in girl’s toys and plush. This likely stems from many companies trying to emulate their success of Squishmallows and Littlest Pet Shop.

Most companies are giving me positive reports coming back from LA Spring Previews so hopefully the strong hiring trend will continue. That said, I remain concerned about growing consumer debt and a large increase in credit card delinquencies. Americans held more than $1.1 trillion on their credit cards at the end of 2023, an all-time high. Nearly 10 percent of that was seriously delinquent, which is defined as 90 days or more late. Even more alarming is the rate at which people are becoming seriously delinquent. This surged to 6.4 per cent in the fourth quarter, up from 4 per cent at the end of 2022, and is the highest level in more than a decade. Additionally, the interest on credit card debt is not compounding at a rate of nearly 23%.

image via wsj.com

While inflation has come down from the 9.1% highs of 2022 the compounded inflation of the last three years has left consumer prices much higher. Some retailers have noticed even higher income consumers feeling squeezed. Dollar Tree recently reported that their fastest growing customer demographic earns more than $125,000 a year. Similarly, Walmart reported that one of the biggest contributors to share gained from other retailers was from shoppers earning more than $100,000. Everyone is feeling stretched and the only group that owes more money than the American consumer might be Toys’R’Us Canada.

So, temperate and sunny while at the same time hearing the low rumble of thunder in the distance. We’ll have to wait and see how things work out. Here at Toyjobs we are cautiously optimistic – as ever. We’re running as fast as we can while trying to maintain our weight on our back foot. It’s a bit awkward. Hoping I don’t end up ass over teakettle.

Heading into 2024 toy manufacturers are mostly optimistic. The year 2022 had left us with an enormous inventory glut and retailers spent 2023 working down inventories. They ordered merchandise light and late. For Toyjobs that meant that the first four months was essentially dead. Fortunately, retail orders started finally advancing in May and consumers picked up the pace of their holiday shopping in November and December. Lo and behold, Christmas came once again.

The inventory pile up meant that most toy companies were flat to down 15% although there were a few exceptions. Flat to down isn’t good for anyone but let’s remember what we’re comparing it to. The pandemic pushed toy sales to rocket in 2020 and 2021. The pandemic wasn’t “normal” nor were the heightened sales volumes. We should instead be comparing our recent sales volumes to 2019. Those comps should lead us all to complain a little less loudly.

Retailers were mostly able to clear their inventories in 2023 and we’re coming into the new year pretty clean. Unfortunately, manufacturers still have excess goods stacked up in warehouses and sucking up storage fees. But on the whole, as we enter 2024, things look pretty positive.

Voyeurs should have an interesting time watching a couple of our industry behemoths. First, an activist investor is trying to force major changes at Mattel whose stock is at the same level it was at twenty years ago. And Hasbro said that it laid off 800 people last year and will do another 1100 in 2024. Those numbers are huge for a company of their size. Personally, I’m always a little suspicious when a public company announces massive layoffs. Oftentimes, big cutbacks are announced for Wall St. but never quite actually happen, at least in the numbers that were initially publicized. I’m hearing that a lot of the downsizing will happen in Hasbro’s redundant international operations where they often have full Sales, Marketing, and Logistics teams in every country. I mean, do we really need separate full offices in Germany, Austria, AND Belgium? Additionally, I am expecting major changes at Hasbro over the next few years. Rumors are rife but we’ll have to wait and watch the action. Popcorn please!

After a pretty miserable 2023, Toyjobs has started the year strong. Now that companies have crunched their holiday sales numbers and returned from Nuremburg, we expect hiring to accelerate. That said, there are some potential clouds on the horizon. Credit card balances are elevated and growing higher at a time when high interest rates are making it harder to pay them off. Delinquencies on credit cards have doubled over the last two years. At the same time consumer bank balances have dropped precipitously. Add to that buy now, pay later services like Afterpay and Klarna surged 14% last year and people who use those services are more than twice as likely to already be delinquent on something else like a credit card, car loan, or mortgage. The concern is that consumers as a group are overextended at a time when it’s harder to pay off snowballing debt. Will they get a grip on it by next holiday sales season? I don’t know but I tend to think not. This is not likely to end well. My advice is to proceed quickly but with a light foot. Think of tip toeing quickly over a rickety bridge. I’ll see you out there. Track shoes and umbrella.

All the best,
Tom Keoughan