You can practically hear the sleigh bells on the horizon, and in just two months — right on schedule — Santa will be making his way down chimneys to deliver toys and games to kids around the world. Of course, old Kris Kringle won’t be the only one spreading joy throughout the season as families gather to celebrate a multitude of holiday traditions.
At retail, holiday prep is in full swing, and if stores aren’t ready by now, they’re already running late. After all, despite the annual mid-August arrival of the usual claims of “Christmas Creep” by some consumers (spoiler alert: this is not a new thing), the seasonality of the business is returning to its pre-pandemic form.
According to the latest data from the National Retail Federation (NRF) and the U.S. Census Bureau (which track sales using different methodologies), retail sales in September were essentially flat against August but were up year over year. The NRF reports a 7.2% spike over last year while the Census reports a 9.4% spike. While inflation is certainly a factor in driving some higher numbers, consumer foot traffic is looking strong.
Toy Departments are Stocked
In my own store checks, the warehouse clubs, including Costco and Sam’s Club appear to have a slightly wider assortment of toys this season, and pallet shippers were set and merchandised by mid-September.
Over the past week, I had a chance to stop in at several different Walmart and Target locations and spotted healthy inventory levels and solid pricing across the board. At the Target locations I visited, toys were beginning to overflow into adjacent departments with overstock placed on overhead risers. One change over the past month is that stock levels appear to have normalized versus the late summer weeks in which I noted some very un-Target-like merchandising at play, including overstocked toys stacked on pallets in the main aisles at discount prices in a few stores.
The big surprise was Walmart.
While they have the volume, merchandising and replenishment at the store level is a notoriously mixed bag that few seem to publicly admit. Over the past few years, the stores that I’ve visited have consistently been ripe with empty pegs and haphazardly stocked shelves. More alarmingly, it hasn’t been uncommon to see brand-new product go straight to the clearance aisles as store associates seemingly use the land of yellow-and-black signage as a catch-all for anything that doesn’t have a shelf tag yet or is already full in its usual spot.
At The Toy Association’s 2023 Preview in Dallas last month, I discussed this off the record with a few different companies that admitted seeing sales pop up with clearance prices at random Walmart stores in some cases even before an item was supposed to be on shelves. Just a week prior to the trade show, I personally saw the new Minis-in-Minis from Super Impulse in a Walmart clearance aisle during what was meant to be a first-to-market launch for the line.
My visits to Walmart stores revealed a shock: they actually look good (see top photo).
Beyond mass, independent toy stores are gearing up for Neighborhood Toy Store Month, presented by the American Specialty Toy Retailing Association (ASTRA) and Toyland opened at farm channel retailers, including Blain’s Farm & Fleet and Fleet Farm, on Oct. 15. Of course, Oct. 15 was also the official grand opening date for Toys “R” Us at Macy’s.
Earnings Season + Some Rumblings
Hasbro kicked off the third quarter earnings season last week with some disappointing but not unexpected numbers, though the company is holding firm on its guidance for the full year. This week, Mattel and Jakks Pacific will check in followed by Funko and Spin Master next week. Thus far, all indications point to more positive news than Hasbro reported for Q3.
On a more interesting note, it seems that news of some mergers and acquisitions is pending.
Over the past few months, there have been rumblings and rumors about several privately-held toy and game companies quietly exploring sale options. Sources tell me that one deal is already done and that we may see an announcement as early as next week. Meanwhile, another company (a leader in its space) continues to pop up in conversation, so it’s only a matter of time until someone pulls the trigger and makes a purchase. It should be noted that none of these are among the upcoming acquisitions that Funko hinted at in its recent investor day event.
To borrow from the great Orson Welles, there “will be no wine before its time.” That said, it’s certainly never my place to spill the beans on something before the time is right, but feel free to speculate if you must!
