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Keep calm and carry on…it’s the Friday Blog!

Published on: April 20th, 2018

So, it looks like we missed out spring and went straight to summer this year – if someone had got around to inventing a laptop screen that worked properly in bright sunlight, I might even have written this week’s Blog al fresco.

The sun may be shining, everyone’s mood has been lifted accordingly, but let’s not kid ourselves, it’s still pretty challenging at retail. Where to start? House of Fraser is said to be on the verge of a CVA, Debenhams mounting debt is getting close to exceeding its stock market value, Mothercare has replaced its chairman of six years and Hamleys has closed its only branch in Ireland. The 35,000 square foot store, which is located in Dublin, was apparently signed on a 1m Euro deal 10 years ago; times were clearly very different then.

Indeed, while many rent deals signed in better times now look onerous (some of the TRU leases were eye-wateringly expensive), it is the addition of last year’s business rate revaluation that has made the current situation particularly toxic. The Entertainer’s Gary Grant spoke out this week to call the business rate hike “a killer”, and I suspect few would disagree. The ill-judged initiative would have hit many retailers hard even in good times, so the timing literally couldn’t have been worse. Gary suggested that business rates are now way out of line with retail turnover and called on the government to step in to sort out the whole mess. Three thoughts spring to mind: 1. I wholeheartedly agree with him. 2. Has he been keeping an eye on what the government has been up to recently (Brexit, Windrush etc)? If so, I’m not sure that we can rely on them to do anything other than make things worse. 3. Please don’t let the government suggest that it’s all going to be ok, as they’ve assigned Mary Portas to sort it all out.

Seriously though, Gary makes the extremely valid point that while landlords are reacting to the current climate and being more realistic about rental charges, business rates are non-negotiable. Perhaps the Toy Retail Association could co-ordinate an industry campaign to keep up the momentum now that Gary has fired the first shots? I just know that anything that can be done to ease the pressure on retailers can only be a good thing for the whole toy community.

I gather that NPD’s March figures continued the early year trend, with value sales down by 5% and volume sales down by 7%. Of course, it is still early days, yet while squishies have taken off far sooner than fidget spinners did last year, even strong sales from this new craze haven’t been able to stem the tide. There is, of course, a long way to go, and there are plenty of bright spots with a lot more to come in the second half of the year, but the toy trade isn’t immune to the vagaries of the wider retail climate.

Over in the States, Isaac Larian’s initial bid for Toys R Us has been turned down. What happens next is anyone’s guess. Will Isaac go back with an improved bid? It’s possible, but he is a shrewd businessman and I doubt he will want to pay over the odds, despite his clear passion for the project. Is there a rival bidder? For the Canadian operation, almost certainly yes (the name of Fairfax Financial Holdings has recently come into the frame); for the US stores, I am not so sure, although it is feasible they are keeping a low profile and will come in at the last minute, like a sneaky eBay bidder. Will the administrator reconsider? Again, it might, but its role is transparent; achieve the best deal for creditors. Emotional factors such as job losses and preserving the retailer for future generations are not in its lexicon: cold hard cash is the only thing it cares about. If liquidating the operation will yield more funds (and I still feel that is a big if…), it will lean that way. So, we have a classic Mexican stand-off (the only thing missing is Donald Trump and a team of wall builders). Let’s hope the situation is resolved swiftly, so everyone can move on. I am already seeing signs that the American toy community is beginning to apply a greater sense of perspective, where previously they were competing in a Chicken Little contest (who can shout ‘the sky is falling in’ loudest).

In breaking American news, Mattel’s Margo Georgiadis has announced that she will be leaving the company after a brief 14-month stint as CEO, to be replaced by Ynon Kreiz. I have no doubt that Margo is a very capable individual, but in truth, particularly with her pure tech background (Google etc.), she was never a great fit for Mattel. Ynon’s experience at Fox Kids Europe and Disney division Maker Studios should stand him in good stead, and “people familiar with the matter” say they hear good things about him. Onwards and upwards.

Back home in the UK, it’s good to see that Toy Fair is enjoying strong re-booking figures, with over 80% of last year’s exhibitors already signed up to return in 2019. There have also been a high number of new exhibitor enquiries, so I’m sure it will be another sold-out show. It is reassuring that the UK supplier community is sufficiently confident about prospects for this year that it is already planning for 2019, and I hope that other global toy shows are experiencing a similar reaction from their exhibitor bases. Keep calm and carry on, it’s the British way.

I wish you all a splendid weekend, let’s hope the weather stays like this and doesn’t change as soon as we leave the office on Friday. Best of luck to all those people from the toy community running the marathon on behalf of the Toy Trust and other great causes. I’ll be putting in some strenuous effort watching them:

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