December, not April, can be the cruelest month for the toy industry. As much as 53 percent of toy makers' and retailers' annual sales come from the final 31 days of the year.
Currency exchange rates for multinational U.S. toy makers add to their uncertainties about sales and profit.
For example, Sean McGowan, senior vice president of research for toys at the New York-based investment firm of Gerard Klauer Mattison & Co. Inc., says the strength of the U.S. dollar is holding down toy makers' earnings from sales abroad.
In a report titled ``State of the Toy Industry 1997-1998,'' McGown predicts that if the dollar remains strong, European sales could be adversely affected next year.
A weakness in some Asian currencies could help offset that, however, by reducing production costs for some companies in 1998.
Since the largest American toy manufacturers — such as Mattel Inc. of El Segundo, Calif., and Pawtucket, R.I.-based Hasbro Inc. — hold relatively small market shares in most countries, significant growth opportunities exist if the economies in a number of nations revive, McGowan points out.
However, McGowan predicts a slowdown for the toy industry overall in 1998 because children are maturing faster and outgrowing traditional toys. He credits Mattel's success, however, in keeping Barbie doll sales strong to its strategy of selling them to younger children.
``Age compression'' is his description of the process that seems to make kids get older younger.
While toy spending may see a softening next year, spending for interactive software for kids is advancing at a clipped pace, according to McGowan. The growing children's software market is the bigger threat to traditional toy sales, he noted.
The Census Bureau estimates the U.S. population of children aged 14 and younger at about 58 million.
That cohort is the core target group for traditional toys, according to McGowan, who notes that those numbers should remain stable for the foreseeable future.
