A sense of perspective…it’s the Friday Blog!

Published on: 17th January 2020

As well as heralding the start of Toy Fair Season, January is also the time when many retailers unveil their festive trading results. I think it’s fair to say that there was some trepidation about this year’s announcements, but encouragingly there have been some very healthy performances, along with – inevitably – some less than stellar ones.

Let’s start with the winners: B&M reported record golden quarter sales (13 weeks to December 28th) of £1.19b, compared to £1.09b the year before. The Very Group also enjoyed a strong Christmas trading period, with toy sales increasing by 8%. The online retailer had certainly been aggressive in its promotional and pricing activity over the festive season, and combined with its “flexible ways to pay” offering, the strategy clearly appealed to consumers.

It wasn’t just the toy market where a strong value proposition resonated with the public; no-one will be surprised to hear that Primark’s sales increased, as did Aldi’s – by a very healthy 7.9% in December. But even that performance was eclipsed by Lidl, which was the fastest-growing grocer over Christmas, with sales 11% higher than the year before, taking £110m sales from its rivals in the process. I did notice that Lidl’s numbers were boosted by a 13% increase in alcohol sales: presumably people were either celebrating an election / Brexit victory or drowning their sorrows.

However, for every action, there is inevitably a reaction. After the Lidl announcement, Tesco’s shares fell by 1.5%, Sainsbury’s shares fell by 1.9% and Morrisons shares fell by 2.4%, wiping a combined £588m off their market value. Perhaps not entirely unrelated, it was also announced that more than 2800 Asda workers face the renewed threat of redundancy as the chain looks to further cut costs. We await further festive retail results with interest – I heard a few interesting rumours in Hong Kong, but best to wait for the official announcements before commenting.

Of course, it is not just here in the UK that retail numbers are spooking investors; over in the US, the markets seem to have gone into meltdown because Target announced that holiday toy sales were flat. Some of the reporting of the announcement has been a little on the scaremongering side too: apparently the fact that “Target didn’t have the strong holiday in the toy department that many expected” has caused “ringing alarm bells for the entire industry.” Has it though – has it really?

Target’s shares fell by 7% on the news, Hasbro’s dropped by 2.5% and Mattel’s by more than 6% – and all on the back of one retailer whose sales didn’t actually decline. Rather than the toy industry, it strikes me that it is the investors who may be the ones panicking here. And as for widespread media claims that there was no hot toy driving the market, try telling that to Isaac Larian…

There are legitimate questions arising from the Target numbers – in particular, relating to its tie-up with Toys R Us on its website. Did that initiative have negligible impact on sales, or would Target’s sales have declined without it? The same questions could be posed about Target’s Disney ‘store-in-store’ activations. However, I just wonder whether ‘flat’ is really so bad? I appreciate that with all of these new initiatives and TRU out of the market, Target expected more, but maybe we all have to think about pressing the reset button on expectation levels. In years gone by, companies would always announce at previews that they were anticipating double digit growth in the coming year. Regardless of the strength of their range, the health of the retail market or the abiding strength of the economy, a 10 % increase was the natural expectation (and UK subsidiaries of US companies were usually the worst culprits). Maybe it’s time to recalibrate? Perhaps the days of automatically posting a 10% increase every year without fail have gone (if indeed they ever existed in the first place, other than in the minds of US management driven by share price bonuses).

To be fair, it isn’t just Americans who may need to apply a little perspective; a headline in the usually reliable Retail Week claimed that – and I quote – “Shunning Toys was one of the trends which defined Christmas.” I’m sorry, but with all due respect, I think that is a bit of an exaggeration. Consumers didn’t “shun toys” by any discernible measure. Granted, fewer toys may have been sold, and maybe less higher price point items at that, but given that many people were either made poorer – or at least made to feel poorer, even if they weren’t – by all the Brexit shenanigans, a modest decline in sales is not the same as toys being shunned.

So, as we head into London Toy Fair next week, let’s hope that as a community we can put the challenges of last year behind us and look ahead to an improved trading year. This will be my fortieth London Toy Fair, and I still feel the same excitement heading into the show as I always did. As exhibitors will now know, there are some major changes coming next year, when the start of the long-awaited Olympia renovation project will lead to a new show layout, spanning different halls. I am sure the BTHA will do everything in its power to mitigate any disruption, especially to those of us who will need to relocate from stand positions we have become very attached to. But change is a constant, and on balance, I am sure most people would agree that staying at the venue through the estimated three years of transformation work is preferable to the alternatives. If you’ve seen the video which shows what Olympia will look like after the expansion work is complete, it looks set to be a truly world-class venue. We may have to put up with a little short-term inconvenience, but I am sure it will all be worth it in the end.

The whole Toy World team looks forward to seeing as many of you as possible at the show next week. Hopefully you’ve all prepared by painstakingly working your way through our largest-ever Toy Fair preview issue – but if you want to do some last-minute prep, you can get the full run down on what awaits you at the show by clicking here. See you there!