Life is a rollercoaster, just got to ride it…it’s the Friday Blog!

Published on: 22nd June 2018

Being part of the toy trade has been something of a rollercoaster ride recently – although the ride has been more akin to Space Mountain than the Big Thunder Mountain Railroad coaster (hopefully enough of you have been to Disney theme parks to appreciate the analogy). Just as I felt the first time I stepped off Space Mountain, the events of the past 12 months will have left a few people decidedly queasy – although others are no doubt exhilarated by the thrill ride.

This week’s lows include a further profit warning from Debenhams; the closure of Toys R Us Australia, despite people assuming it would be bundled with the Asian operation as part of the ongoing sale process, as well as the loss of 100 jobs at Poundworld’s head office, with a further 5000 at risk as the fate of the chain looks increasingly bleak. Indeed, I was curious to see that the administrator announced that stores would be holding closing down sales, while sending an email to employees saying that the closing down sale didn’t necessarily mean that stores would be closing. I’m sure they appreciated that attempt at ‘clarity’.

Meanwhile, the whole of the US toy industry is nervously holding its collective breath as Trump decides whether to introduce further tariffs on Chinese goods as part of its escalating trade war and if so, whether toys will be part of the latest set of measures. The Toy Association lobbied hard to keep toys off the initial list of affected products, so hopefully the category will remain unaffected this time round (although as it is the Trump administration, no-one can possibly know).

Hornby’s ongoing struggles resemble a nightmare rollercoaster ride all of its own, as its turnover has dropped dramatically (25% lower than last year, which was itself a poor year) and shares have slumped accordingly, while the only things climbing are its losses. A rather tortuous metaphor from CEO Lyndon Davies accompanying the disappointing results, likening Hornby’s situation to “booking a restaurant last minute,” suggests that he may have become rather confused and disoriented by the violent twists and turns of the ride he is on.

However, there are thankfully plenty of highs to balance the lows: for example, Tesco has not only recorded its tenth consecutive quarter of growth, but the latest quarter represented its strongest growth for seven years. Meanwhile, Amazon has finally done something to address one of its biggest problem areas by shutting down the accounts of thousands of Chinese companies that use its website to sell products in the UK without paying VAT. “About time too” some might say, but at least Amazon is finally acknowledging that it can’t just keep claiming it is powerless to stop it – providing, of course, that it doesn’t just let them back onto the site a few days later under a different name. Who knows, maybe Amazon will put its own tax affairs in order next, and then we can really start to talk about a responsible retailer which is playing fair.

On a related note, over in the US, the Supreme Court has approved states and local governments to start collecting billions of dollars in sales taxes from internet retailers that don’t currently charge tax to their customers, overturning a 1992 ruling that effectively designated the internet as a tax-free zone. Maybe – just maybe – the playing field is slowly being levelled.

I also have to applaud the Parliamentary Committee for its brutal questioning of executives from Asda and Sainsbury’s this week; while the CMA does its usual impression of a chocolate fireguard, MPs certainly didn’t pull their punches, calling the deal a “financial fix” and accusing the companies of using “Mickey Mouse numbers” (careful chaps, you’ll get a huge bill from Disney). MPs also referred to the promise to run the two brands separately as “baloney” and went on to say that most suppliers were too terrified to say anything negative about the merger for fear of retribution. While Roger Burnley and Mike Coupe robustly defended the merger, one MP told the pair: “We are not children, you can’t just come in here and give us a nursery rhyme.” Suffice to say that Mike was not caught on camera singing on this occasion, and if he had been, I suspect it would have been a rather different song.

Back in the heart of the toy market, suppliers and retailers are also riding their own personal rollercoasters, with some intriguing results; according to NPD, the list of the top ten fastest growing suppliers so far this year includes only one from the top ten largest companies – unsurprisingly MGA Entertainment (which is obviously on the thrill ride of a lifetime). The rest of the spots are taken by suppliers ranging from the number 11 ranking to number 68 – despite the challenging climate, there are still plenty of companies making good strides this year. You can read who they are and which categories are performing strongly in one of two NPD articles in the July issue of Toy World – the second piece looks at the post-TRU landscape where, once again, some retailers are set to benefit substantially.

Summer movies also appear to be enjoying a better year than 2017, with both The Incredibles and Jurassic World: Fallen Kingdom getting off to strong start at the box office; hopefully this will translate into toy sales over the coming weeks.

It was announced yesterday that Mark Foster will be leaving his role at Tomy, where senior leadership from Tomy International, the subsidiary responsible for North America and Latin America, will assume responsibility for overseeing the European business, with Mary Wood remaining at the helm of the UK business. It will be interesting to see where Mark pops up next – we’ll let you know in the coming weeks.

Finally, a couple of major developments at Disney to report: I hear on the grapevine (from a reliable source) that Simon Philips will be leaving Disney Consumer Products shortly. News has also just broken that Lucasfilm has put plans for future Star Wars spin-offs (including the Obi-Wan movie) on hold. So, with ‘A Star Wars Story’ films suspended, resources will now be focused on Episode IX and the next trilogy of Star Wars films. Well, well, well.