Toys 'R' Us fallout puts toy makers under pressure
Iconic retailer Toys ‘R’ Us announced plans to sell or close more than 700 of its stores. Despite the news, some toy companies say it’ll just be a “blip” for the industry.
The companies behind such popular toy brands as Barbie and Play-Doh face the prospect of sales declines after Toys ‘R’ Us announced that all of its 735 stores will close.
Shares of toy makers Mattel and Hasbro, already under pressure from weaker sales and the initial bankruptcy filing of Toys ‘R’ Us in September, posted new losses this week. Mattel, whose portfolio includes Barbie and Hot Wheels, fell 7.6% on the week and traded near its 52-week low. Hasbro, known for brands such as Monopoly and Play-Doh, retreated 4.8%.
Mattel and Hasbro have counted on Toys ‘R’ Us as one of their top buyers. The retailer was responsible for at least 15% of Mattel’s U.S. sales, making it the toy company’s second-largest customer. The Wall Street Journal reported that Toys ‘R’ Us still owes Mattel more than $135 million in payments.
Investment bank Jefferies estimated that the fallout from the Toys ‘R’ Us liquidation will include a sales drop of 2.5% to 5.5% across the entire industry in 2018, as Reuters reported. The impact on toy orders will spread beyond Toys ‘R’ Us. With the nation’s most recognizable toy chain on its way out, other retailers such as Target and Walmart will look to reconcile their own inventories this year, Jefferies added.
Toys ‘R’ Us CEO David Brandon, speaking on a conference call with employees, said vendors who did not support the retailer during a disappointing holiday season would “live to regret” its demise, according to The Journal.