![]() The continued increase in revenues, shown in Figure 1, suggests that price rises may not have deterred shoppers during the off-peak season. Six of the eight firms have stated they deliberately increased their inventories to (a) avoid repeating the shortfalls linked to slower-than-expected shipping in 20 and (b) reduce their exposure to continuing cost inflation.Īll six of those firms have also increased their prices, citing confidence that toy buyers won’t want to disappoint their recipients. So, why have retailers increased their inventories so aggressively?įlexport’s review of earnings conference call transcripts for eight global toy and video game manufacturers and retailers makes the reason plain. Early Loading to Avoid Later Problems - Toy Trade Activity That may indicate toy firms have had fewer challenges in managing their supply chains than other leisure firms, which include sports goods retailers among others. For reference, the inventory-to-sales ratio for leisure goods companies more broadly reached 0.86x, in Q2’22, compared to 0.63x in 2011 to 2019. The resulting inventory-to-sales ratio of 0.72x compares to 0.66x in the 2011 to 2019 period. The value of inventories surged 62% higher over the same period. The rate of consumer price inflation in toys was just 1.9% in June 2022, suggesting a significant growth in real terms too. Revenues in Q2’22 increased by 17% year over year in nominal terms. The expansion has continued through to 2022. Subsequent growth in sales may reflect the more widespread rise in consumer spending seen across the economy. That partly reflects the downturn and subsequent recovery from pandemic-related factory closures. The second pattern evident in the chart is the rapid acceleration of activity after Q3’20. Retail sales of toys to consumers peak in November and December, as discussed in prior Flexport research. the three months to September 30) tends to represent peak revenues as toy wholesalers book their revenues to end-retailers-general retail stores and e-commerce platforms-that are outside the sample group. Inventories have historically reached their peaks in Q2 and Q3 each year, in order to supply revenues which peak in Q3 and Q4. Figure 1 combines the financial data for six toy producers and retailers, rebased to Q1 2017 levels. The seasonality can be seen in a significant swing in both revenues and inventories during the year. Heading for the Sack - Increased Inventory Ratiosįew supply chains have as specific a timeframe constraint as the toy industry, both from a single-event perspective (Christmas gift-giving season in American and European markets) and in terms of specific products (also known as “hot-toys”). We show how inventory growth is outstripping demand as the major toymakers try to avoid the seasonal stock-outs experienced in previous years. This report takes a deep dive into the highly seasonal toy sector. As discussed in recent Flexport research, there’s been a marked uptick in corporate inventory balances across many industries reflecting (a) a desire to resolve earlier shortages and (b) a slide in consumer demand. A review of corporate earnings calls finds the inventory build-up is the result of deliberate actions by manufacturers and retailers, who are seeking to avoid the shortages which bedeviled holiday shopping in 20.Ĭorporate inventory strategies are changing rapidly. How have toy makers reacted to supply chain disruptions over the past two years? Is there evidence of a shift in activity patterns for this highly seasonal industry? Using corporate financial data, this report finds there’s been a surge in toy inventories.
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