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WHAT’S IN STORE FOR 2014: TOY INDUSTRY ANALYSTS SHARE PREDICTIONS

Retail Sales to Rebound in Spring

The International Council of Shopping Industries reported today that “a battle between winter and spring weather” – and the later Easter holiday – continue to impact consumer appetite for seasonal merchandise. Nonetheless, the retail industry has posted average weekly gains of about 0.76% since the beginning of March, with year-over-year March sales predicted to rise by about 3%.

March 18, 2014 | With many exhibitors and buyers reporting a busy and successful Toy Fair 2014, industry analysts are watching how the show’s momentum will impact toy sales in the coming months. Will active and outdoor toys boost spring sales, or will customizable and construction toys lead the way? Which media and entertainment properties will reign supreme in 2014? The Toy Industry Association (TIA) recently spoke with industry analysts to gain their predictions for what’s in store for the world of toys, games and youth entertainment...

Gerrick Johnson, Toy Analyst at BMO Capital Markets, estimates that U.S. retail toy sales will grow by about 2% in 2014, thanks in part to the “positive vibe” felt at Toy Fair. Johnson noted that the “number of quality and innovative new products [at Toy Fair] was improved over 2013,” pointing to several of TIA’s key trends of the year as potential sales drivers, including “customization, bigger toys, zombies, and better integration of apps into toys.”

Utku Tansel, Head of Toy and Games Research at Euromonitor International, agreed that 2014 will be “a better year for toy sales,”thanks to the ever-growing worldwide popularity of licensed toys, which currently captures about 30% of U.S. domestic toy sales.

Tansel added that construction and pre-school toys are “categories to watch” over the next five years.

“The construction category is forecast to bounce back thanks mainly to the popularity of The LEGO Movie in 2014 and the new Star Wars movie, due to be launched in 2015,” said Tansel. “The preschool category will be driven largely by the ever-growing number of tablets targeted to young children.”

Nonetheless, while the toy industry continues to churn out a steady stream of innovative toys, retailers remain cautious: “[Buyers] are not taking a lot of new untested product and sticking with safe bets,” observed Johnson.

High year-end inventories in the U.S. are projected to “dampen U.S. retail demand” at the outset of 2014, cautioned Sean McGowan, Managing Director of Equity Research at Needham & Co.

“I think this is going to be a difficult year for the toy industry,” said McGowan, adding that his conservative projections are based primarily on “lackluster fourth quarter sales results” for many of the big public toy companies.

Poor winter weather, the continuing growth of video/mobile games, and the consolidation of major toy retail stores could have a negative impact on first quarter sales, according to McGowan.

McGowan did note that a bright spot for the industry will continue to be in emerging worldwide toy markets. Additionally, McGowan projected that 2014 will be a strong year for movie licenses and, “once the weather does improve, people should be eager to get outside and enjoy outdoor toys.”