Parents Feeling Guilty About Covid Ignites Boom in Toy Sales
(Bloomberg) -- Celebrating the holidays might be pretty ho-hum, but one area that’s booming is toys.
After a terrible year of remote school, canceled birthday parties and little vacationing, parents and grandparents ridden with so-called “Covid guilt” are spending a lot more on puzzles, crafts and games. And this is setting up the U.S. industry for its best Christmas in years—and maybe ever.
“I’ve been in the toy industry for 30 years, and sales are just about as good as I've ever seen them,” said Jay Foreman, chief executive officer of closely held toymaker Basic Fun. Retail purchases of his company’s toys, including Tonka trucks, have been up more than 30% since August and show no signs of slowing down, he said. “Toys are a way for parents to treat their kids when they are so worried about what’s going on in the world.”
Earlier in the year, it looked like the toy industry would be in for another tumultuous period. Sales fell in 2018 and 2019 and were flat in the first three months of the year, as retailers shuttered stores amid the coronavirus pandemic. But after schools closed, parents needed things to occupy their kids while the worked from home, and purchases rebounded.
Through the first three quarters of the year, industry revenue surged 19%, according to researcher NPD Group. And Foreman predicts that demand will stay elevated through the first half of next year as Americans keep social distancing until the vaccine is widespread.
Since the end of March, toymaker stocks have had huge rallies. Mattel, Spin Master and Funko have all more than doubled, compared to a 44% for the the S&P 500. Meanwhile, Hasbro has risen only 30%, somewhat held back by its licenses with Disney and Marvel tying it to the struggling movie industry.
Barbie-doll maker Mattel reported sales that outpaced estimates last quarter—and says toy buying isn’t letting up. Parents are planning to spend the same—or more—on toys for the holidays during the fourth quarter, according to Chief Executive Officer Ynon Kreiz.
“The toy industry as a whole is growing meaningfully and continues to demonstrate its resilience in challenging economic times,” Kreiz said at a recent conference. “Parents are spending money.”
The U.S. toy industry has been in turmoil since Toys ‘R’ Us, the world’s largest toy chain, liquidated in 2018. To fill the void, retailers of all shapes and sizes either added playthings or expanded their assortment. That’s taken a few years to shake out, and now the problem is getting enough goods, according to Foreman, who said shipping delays on goods from China has made filling orders harder.
But the sector will gladly trade some supply-chain headaches for robust demand. And a big part of those gains can be chalked up to the pandemic. Nearly a third of people with children say they feel guilty heading into the holidays after lacking social time with family and friends, according to a Harris Poll for Bloomberg News.
“For many parents, there has been this tension where they wish they could spend more time with their kids,” said Rebecca Hamilton, marketing professor at Georgetown University. “They can’t give them time but they can give them other things to occupy them. Some of it is feeling guilty.”
During Covid, toys became part of the booming at-home economy that saw Americans splurge on their dwellings, whether it be repainting, buying new furniture or decking out play rooms. Retailers like Home Depot, Lowe’s and Wayfair have all posted gigantic revenue gains.
By adding toys, grocery chains are only adding to their robust gains after Americans cooked more during the pandemic. Albertsons Cos., the parent of Jewel-Osco and other regional supermarkets, is stocking more name-brand toys from the popular television series The Mandalorian and games like Operation and Jenga.
“As smaller gatherings continue to be the norm this holiday, we expect to see more board games, puzzles, and family activity games in their baskets,” said Geoff White, chief merchandising officer at Albertsons.
These gains also come without the usual tie-ins to blockbuster films that have been postponed because of Covid. Instead, there have been big increases in dolls, games and building sets. At Basic Fun, Lite Brite, which debuted in the 1960s, is one of its bestsellers. The desire for nostalgia often increases during trying times, and that trend has been seen across food and clothing, too. It’s just another reason for Foreman to marvel at how much the industry has rebounded.
Earlier in the year, “I'm wondering if my business will still be open, let alone have one of our best years ever,” Foreman said. “It was really that dire."
©2020 Bloomberg L.P.