Rebounding from last year's crash and burn of Toys R Us, U.S. toy sales edged up this year. But a host of challenges, led by tariff threats, continue to fret executive suites.
Sales in the first six months of the year fell 9 percent from the same period in 2018, when thrifty parents stocked toy chests with bargain-priced goods from shuttering Toys R Us stores, market research firm The NPD Group reports. But third-quarter sales edged up 3 percent to $3.69 billion.
NPD anticipates modest but steady growth is expected for the ever-critical fourth quarter, when an unusually truncated shopping season — Thanksgiving is five days later this year than last — is expected to give a boost to beleaguered brick-and-mortar stores.
"The sales trends for the first half of 2019 were distorted because of the comparisons to the first half of 2018, which is when the Toys R Us liquidation sales helped to increase toy industry growth," said Juli Lennett, vice president and industry adviser, toys, at Port Washington, N.Y.-based NPD. "Although sales were down 9 percent in the first half of this year, the gains in the back half will make up for almost all of those losses."
"If I had to make a prediction, Target and Walmart and Amazon [are] going to have a fantastic year, while Penneys, Macy's and Kohl's will struggle," said longtime industry observer Richard Gottlieb of New York's Global Toy Experts.
The fourth quarter is the industry's biggest, but the outlook after that is the most unsettled it has been in years.
"Reading the tea leaves is difficult," Gottlieb said.
The No. 1 concern is the continuing China-U.S. trade war. Despite the ardent lobbying of New York-based trade group Toy Association and toy companies big and small, the Trump administration remains poised to impose a 15 percent tariff Dec. 15 on China-made toys.
Currently, there are no tariffs on Chinese toys.
"[T]he proposed tariffs on toy imports from China will devastate the toy industry and assuredly lead to higher consumer prices," Toy Association President and CEO Steve Pasierb wrote to United States Trade Representative Robert Lighthizer in June.
Other key issues cited by Gottlieb include industry players still grappling with the Toys R Us shutdown, a rise in counterfeit goods and the accelerating growth of online sales.
The decades-long shift from brick-and-mortar to online stores continued apace this year, driven by millennials — the young adults who now drive toy sales for their own children — for whom convenience is as crucial as low price.
"This is a generation that does not have a tolerance for wasted time. They don't like to go to stores only to find something is out of stock," Gottlieb told Plastics News.
On a macro level, the possible effects of impeachment and Brexit are far from clear.
In Hong Kong, continuing unrest could stifle attendance at next month's Toys & Games Show, one of the world's biggest toy shows. Show sponsor Hong Kong Trade Development Council has announced "enhanced transport and customer support services" for wary buyers.
On a technical note, the latest updates to ASTM-F963, the voluntary standards for toy safety, are slated to be voted on by membership in early 2020. These amendments will cover phthalates — an additive that makes plastics softer — and toys that expand when placed in water, said spokesman Nathan Osburn of West Conshohocken, Pa.-based ASTM.
ASTM-F963 was last updated in 2017.