The global toy industry faces a dilemma heading into the peak shipping season ahead of the western economies' pre-holiday shopping period. On the one hand, drawing imports in via normal seaborne shipping patterns runs the risk of excess inventories if consumer demand does not recover in the wake of COVID-19. On the other hand, not importing as usual runs the risk of having to absorb increased costs with last-minute, airborne shipping particularly for must-have ranges.
Panjiva's data shows that U.S. seaborne imports of toys and games fell by 11.3% year over year in July, normally the run-up to the start of peak shipping, after a 5.9% decline in June. That would suggest retailers are taking a more conservative approach and is a worse performance than the consumer discretionary sector more broadly which has seen a recovery in the first half of July as discussed in Panjiva's July 27 report.
Imports linked to the leisure products sector more broadly — which includes sports equipment and camping gear as well as toys — accelerated to a 29.4% increase, suggesting the retail industry's outlook is more optimistic outside toys.
The major toy suppliers to the U.S., Mattel Inc. and Hasbro Inc., have seen markedly different performances in terms of U.S. seaborne imports. Panjiva's data shows that U.S. seaborne import shipments linked to Hasbro dropped by 37.1% year over year in the first half of July after sliding 15.7% lower in June and falling by 17.8% in the second quarter overall. That left shipments at their lowest since at least 2015.
That is likely driven by supply chain issues rather than demand. Indeed, the company has missed analysts' expectations for second-quarter revenues by 14.0%, S&P Global Market Intelligence data shows, with the company citing "a very challenging revenue period due to global closures in our supply chain" including plant closures in Ireland and India as well as the U.S.
Indeed, seaborne shipments from India dropped by 39.0% year over year in the second quarter but have rebounded by 92.0% in the first half of July. The bulk of the company's shipments are from China, however, which have actually headed in the reverse direction with a 38.8% slide after a 10.8% decline in the second quarter.
Mattel, by contrast, reported earnings that beat revenue estimates by 5.8% in the second quarter, including "the successful launch of Star Wars: The Child plush product line" where supplies had been long anticipated and highlighted in Panjiva's May 4 analysis. CEO Ynon Kreiz also noted that "supply chain also continued to perform well despite temporary closures of certain manufacturing and distribution facilities early in the quarter."
That has come as U.S. seaborne imports linked to Mattel improved by 8.8% year over year in the second quarter with a surge that continued to a 43.2% surge in the first half of July. That would suggest the company also has an upbeat outlook for the peak season.
Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.