By the time you read this, I’ll be a few thousand miles away, as Anita and I will be celebrating our silver wedding anniversary. So, if anything else major has happened in the past twenty-four hours and you’re wondering why I’ve not covered it, now you know. Because, frankly, it has already been the sort of week where you never know what is around the corner….
I am typing a whole new start to this Blog while waiting for our taxi to the airport, as I’ve woken up to the news that Toys R Us has appointed a law firm to help restructure its $400m of debt due next year, with – whisper it quietly – filing for bankruptcy protection said to be an option. With the difficulty of obtaining credit insurance already a major issue across the industry (and let’s not forget the role that played in Woolworths’ demise), this does not bode particularly well for the whole global toy market, although it is still only speculation at this point. There should be more concrete news by the end of the month – a nervous few weeks lie ahead.
Earlier in the week, Lego announced that it will be shedding around 8% of its global work-force in reaction to a trading downturn in the first half of the year. After ten years of consistent growth, it was the story that some industry observers thought they may never see again; indeed, it caused such seismic ripples that Mattel and Hasbro’s share prices both dropped, as investors suddenly got cold feet about prospects for the toy market as a whole (as I type this, it seems further drops are likely after the Toys R Us developments).
But, as ever, the devil is very much in the detail, and the Lego story bears greater scrutiny – there is arguably far more to it than just the headline job losses. For starters, the sales dip is confined to a relatively small part of Lego’s portfolio: proprietary ranges such as Lego City, Friends, Duplo and Technic have all continued to perform well. The shortfall has been blamed on the under-performance of a couple of the licensed ranges, particularly Batman and Star Wars. I’ve written at great length in the Blog about the ongoing tribulations of the Star Wars franchise, which are as much about level of expectation as anything. Lego Batman is an interesting subject: I had picked up feedback from many independents earlier in the year that the range hadn’t performed quite as well as had been anticipated, although when I spoke to NPD about it, they robustly defended the brand’s performance. At the time, we ruminated on how there can sometimes be a significant divergence between industry perception and the actual numbers – this latest development puts an interesting twist on the discussion. Moving forward, it seems that one of Lego’s key challenges revolves around balancing its licensed ranges within its enviable proprietary portfolio.
I also admired the honesty of Jorgen Vig Knudstorp, who admitted that the Lego organisation had become increasingly complex. I think it’s fair to say that the same observation – about the company having too many layers and overlapping functions – could be made about many huge global corporations, both within and outside the toy / licensing community. I genuinely feel sorry for the Lego employees whose roles disappear during the reorganisation, but I can’t help thinking that creating a leaner, more focused company could prove to be a positive move in many respects.
Speaking of leaner and fitter companies, Mothercare trading director Fiona Murray-Young apparently left her role just over a month ago. They certainly kept that quiet. There have also been further changes at Vivid, where Antony Hicks, who some will remember from his time at LeapFrog, has been appointed as CEO. He replaces Eric Rossi, who steps down from the role for family reasons (and having been commuting from his home in France to Surrey for the past few years, who can blame him).
Elsewhere, Llyr Lewis has returned from California to take up the position of VP licensing EMEA at Just Play, while Paul Dearlove has joined Schleich as trade marketing manager and Will Abigail is now handling the South East and Anglia region for Marbel. We wish them all well in their new roles.
Oh, and just to add to the week’s major news stories, Asda announced that it is the latest grocer to be cutting around head office jobs – around 300 – with trading functions (i.e. the buying team) likely to be streamlined as part of the move.
When the dust settles on 2017, I suspect it will be seen as a year that sorted the proverbial ‘men from the boys’ (or ‘women from the girls’, in case Let Toys be Toys is reading this and makes me their next target). There is no room for complacency, ‘just ticking over’ or a bloated infrastructure – lean and mean is the order of the day. Many businesses will thrive in this environment, especially the ones that are good at what they do and specialist in their field. It’s not a good time to be an also-ran or making up the numbers. It is very much a case of survival of the fittest.