The CMA has finally confirmed what had been widely predicted for some time – that it would be blocking the proposed Sainsbury’s Asda merger. Perhaps unsurprisingly, given the unequivocal nature of the CMA’s findings, the grocers have decided to concede defeat; the general consensus is that neither party will appeal the ruling. Thus ends the ‘Sasda’ saga, not with a bang but with a whimper. It will be interesting to see where the two supermarkets go from here. Clearly there will be pressure on Sainsbury’s boss Mike Coupe, with the retailer’s share price down by a third since last summer and a further 5% since the verdict was announced. I’ve already read a flurry of tweets and comments that suggest he will be lucky to survive the fallout. The retailer also faces a potential bill of up to £50m, largely in lieu of fees already spent on bankers and lawyers. Ouch.
Asda is arguably in a different position: its recent improved performance eases pressure on Walmart to take any immediate decisions. Indeed, some observers are now suggesting that Walmart may be inclined to cancel its plans to sell the chain, while others have suggested that it could pursue an IPO instead. The resignation of Asda chief executive Roger Burnley from the board of Huddersfield Town Football Club has been cited as evidence that he is planning to stay put and devote more time to his role at Asda. This may be true, or it may just be that he knows enough about football to realise that being a director of Huddersfield over the next few years may prove to be an even more thankless task than being the director of a retail operation. If nothing else, toy buyers at both operations – along with suppliers – now have clarity and can plan accordingly, which I am sure will be welcomed across the market.
Hasbro announced its Q1 results this week, unveiling what some analysts described as “surprise” profits. Revenue from the company’s core franchise brands segment rose by a very healthy 9%, comfortably surpassing analysts’ expectations, while net revenue overall rose by 2.3% to $732.5m. Mattel’s results also showed signs of encouragement: Barbie posted its sixth consecutive quarter of growth, while other key brands and categories such as Hot Wheels, Jurassic World and Games all made positive contributions to a set of results which saw Mattel’s shares rise by 12% after they were announced.
I’m pleased for Hasbro and Mattel, and also for the toy market as a whole: hopefully these results will encourage analysts, shareholders, lenders and media observers to take a more positive view of the toy industry. We’ve also hopefully reached the point where everyone can start to move past last year’s Toys R Us bankruptcy. Developments like that cast a long shadow, and there is a tendency in some quarters to dwell on them long after their short-term impact has dissipated.
Indeed, I rather appreciated Isaac Larian’s slightly tongue-in-cheek announcement that he “blamed” part of his current success on “Toys R Us closing and the late Easter” (maybe he’d been reading last week’s Blog?), claiming that MGA’s Q1 worldwide shipping figure was up by 46%. As MGA isn’t a public company, this number can’t of course be officially verified, although few would doubt its veracity. The New York Post picked up on Isaac’s comments, using them in what I thought ended up as a slightly mean-spirited piece, which inferred that other toy companies were “fed up” with L.O.L. Surprise! and “annoyed” at Isaac’s “gloating” (their words, not mine). I suspect that the quotes from toy company executives in the article may have been taken out of context: it seems rather uncharitable (not to mention un-American) to begrudge success so publicly. Do we really hate it so much when someone enjoys such huge success? Every toy company owner knows it could be their turn to have a runaway hit next; that’s the nature of the highly unpredictable and volatile toy industry we all know and love. Most people in the toy community get this; perhaps some outsiders don’t, and I think this particular article – with its overtones of implied resentment and jealousy – is a prime example of an outsider missing the mark. Sure, it’s tough to go directly up against any line which is performing that well, but as the very healthy Girls Collectibles feature in the June issue of Toy World will illustrate, there is more to any category than just one line. I suspect that shelf space and online / catalogue pages devoted to girl-targeted brands has expanded across the globe over the past year or two; sometimes it is good to focus on the positive aspects rather than dwell purely on the negatives.
If you’re heading to Solihull for the Independent Toy & Gift Show on Monday, I’ll look forward to seeing you there. Next week’s show kicks off a busy period in the toy and licensing event calendar, encompassing the Toymaster Show in Harrogate, Distoy in London and Licensing Expo in Las Vegas. There is also the imminent launch of several major movie releases to look forward to, including Avengers Endgame and Detective Pikachu, which have both received fulsome praise from those people lucky enough to have got a sneak peek (or in the case of the Pokemon movie, presumably a sneak Peekachu! Thank you, I’m here all week…). I’ll also be speaking at the Lima Mind Mix event in Paris next month, hosting a round-table discussion which will be looking at the future of toys and play, and how that intersects with the licensing community. I plan to be as candid and forthright as the format allows. With so many occasions where the toy and licensing communities will be congregating, I’m sure there will be plenty of interesting things to talk about over the next few Blogs.
Finally, if you wondered how the staff at Asda have reacted to this week’s news, my money is on this (spoof) twitter account being remarkably accurate:
— Sainsda (@Sainsda) April 25, 2019