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US holiday toy imports fall in the wake of Toys R Us liquidation

U.S. toy imports dropped year over year in the buildup to holiday shopping as the industry reels from Toys R Us Inc.'s liquidation.

Seaborne toy imports to the U.S. fell 9.1% in the three months ended Aug. 31 compared with the year-ago period, according to Panjiva Research, a division of S&P Global Inc.

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This is a critical time for holiday imports. Although holiday shopping is still months away for consumers, retailers build up their holiday inventory in late summer and early fall. In the toy category, holiday shopping is particularly important, even compared to other retail sectors. Large toymakers such as Hasbro Inc. and Mattel Inc. typically make well over half of their annual income in the latter half of the year.

"It's difficult to overstate how important holidays are to the toy industry, Jim Silver, CEO and editor-in-chief of toy trade publication, said in an interview. "The fact that imports are down going into this season, which probably means that retailers will be selling fewer toys, that could be problematic for everyone in the industry."

Typically, retailers that sell toys begin making key decisions about the kinds of levels of merchandise they will carry for the holiday shopping period as early as late June and July, with the peak of imports shipping around October.

So far, it is the worst year for seaborne toy imports since 2015. The U.S has imported $7.26 billion in toys year-to-date in 2018, compared with $7.82 billion a year ago, according to Panjiva.

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The liquidation of Toys R Us is likely one of the main reasons for the year-over-year fall in toy imports, Chris Rogers, research director for Panjiva, said in an interview. But there could be other factors contributing to the decline, including tough year-over-year comparisons or a different product mix that could skew the numbers.

"Toys R Us is certainly a large part of the equation," he said. "But it might not be all of it. It might be that last year was a little overinflated; it might be that last year everyone got a big plastic remote-controlled something and this year they're getting an iPad."

The decline comes even as general merchandisers like Walmart Inc. and Target Corp. rush to grab the Toys R Us abandoned market share, Silver said.

Walmart said in late August that it is adding 30% to its toy selection at brick-and-mortar locations. Target is also expanding its toy offerings to include more than 2,500 new and exclusive items before the holiday shopping season. Even smaller department stores are angling for a larger piece of the toy market, with J. C. Penney Co. Inc. adding 40% more toys to its shelves.

For Target, for example, total volumes imported rose 10.1% in the three months ended Aug. 31 compared to a year earlier, according to Panjiva.

But those retailers are clearly not filling the hole left by Toys R Us, Silver said.

"A major player, the biggest player, in fact, is suddenly not here," he said. "Walmart and Target are trying to keep up, but it's going to be hard to make up that volume without Toys R Us."