Ayes to the right…it’s the Friday Blog!

Published on: December 15th, 2017

In less than one week, creditors will vote on the Toys R Us UK CVA. It seems to be generally accepted that the vote will come out strongly in favour of the proposal, enabling Toys R Us to proceed to the next – arguably trickier – stage of the negotiations (notice any parallels here…?). I had been working on the assumption that the 29 profitable stores would not form part of the discussion with landlords, but as someone pointed out after last week’s Blog, that may not entirely end up being TRU’s decision. Landlords are now aware that a struggling retailer has made a healthy profit in those locations; although TRU would therefore love to stay, might the landlord have other ideas? Could they feel that there are tenants who would pay more, or who would arguably be less of a risk, in these prime sites?

And don’t discount the role that the Pensions Regulator may yet play – although media reports (and MP Frank Field) had quoted the pension deficit at £18.4m, the deficit on liquidation is in fact £80m (thanks to the retailer who made it all the way to page 106 of the CVA document for that nugget). There have also been media reports of previous TRU UK boss Roger Mclaughlan trebling his remuneration in a two-year period between 2013 and 2015, from a not to be sniffed at £300k to a frankly staggering £1.3m – all this while the retailer was continuing to post losses, lest we forget. Taking everything into consideration, you can see why the situation remains far from black and white.

Elsewhere, week 48 apparently saw the UK toy market continue its recent slide, with a drop of 11%. I’m told that similar patterns are now emerging throughout Europe: Italy, France, Spain and Holland have all been in decline. The best performing territory is Germany at +1%. I’m told that NPD is still predicting the UK market will end up only marginally down, at around 1%. That is a bold call – you have to admire their optimism. It is still achievable, of course: weeks 50 / 51 can theoretically each equate to a month’s worth of trading figures. However, after the past two months, this outcome would require some concerted spending by the great British public, which has hitherto not been evident. I’m sure we all hope that NPD’s crystal ball is working perfectly.

Last weekend’s bout of heavy snow didn’t help matters. My Facebook and twitter timelines featured numerous retailers bemoaning the fact they couldn’t open their stores last Sunday. Official figures suggest footfall was down by 22% on Sunday and 9% across the weekend as a whole. Not what anyone needed right now: whatever happens in the next few weeks, this year is certainly going to test the resolve of some companies. We reported yesterday that John Crane will cease trading in the early part of the next year – you can read that story in full here. Will the current trading conditions lead to further casualties? We all sincerely hope not, but it can’t be beyond the realm of possibility.

Last week’s Blog brought you the news that Mattel UK’s country manager Dominic Geddes would be stepping down at the end of the year. I received numerous enquiries asking if I knew what the new Mattel UK leadership structure would look like. So, I can now confirm that Michael Hick has been appointed as country sales lead for the UK and Ireland. In his new role, Michael will report directly to Sanjay Luther, managing director Europe. Michael will therefore lead the changes in the UK, which – it should be remembered – remains Mattel’s largest market in Europe. I’m sure that means it will ensure that the UK operation is well-supported in terms of budget and infrastructure going forward.

Just as I sat down to write this week’s Blog, it was announced that after weeks of speculation, Disney had confirmed the acquisition of a large chunk of Rupert Murdoch’s 21st Century Fox business, parting with around £50b for the privilege. So, what does that princely sum buy them? Well, apart from adding yet more older boys’ properties into Disney’s already bulging licensing portfolio (what’s that you say, “just what the industry needs right now”), it will also bring Sky under Disney’s control over the next year or so. I am sure that a few people who know far more than I about the consumer media market will be keen to share their thoughts on how this might impact the toy business over the coming years.

While people have dwelled on the challenges that the big three toy companies have faced this year, it has to be said that – by its own high standards – Disney has had a pretty tough time in 2017. Not that they would see it that way, naturally, but that’s what I’m hearing from many licensees and retailers. Is the latest instalment of Star Wars going to follow the trend of under-performing 2017 movies, or will it herald a much-needed change in fortune for Disney? Who knows, maybe the Fox acquisition will mean it’s time for a new corporate logo; some people have been quick off the mark with their suggestions…

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