The 2010 Outlook: Hasbro, Mattel and Lego lead the way but…

In the last month I have visited the Hong Kong and Nuremberg toy shows. At both shows, I detected a growing confidence in the toy industry. I expect to find the same outlook during the coming New York Toy Fair.

There is reason for this positive outlook. Mattel, Lego and Hasbro had strong performances in 2009. In addition, Hasbro is looking forward to a strong 2010. As Gerrick Johnson of BMO Capital Markets put it: “Hasbro management commented that the company could grow sales and earnings in 2010 absent deterioration in consumer spending or global economic conditions.”

On top of that, there will be more retail doors this year than last (thank you Toys R Us, Sears and Spencer’s), video game sales will continue to be soft and free up more dollars for traditional toys and the industry will be running against weak first half 2009 numbers. 

So I am feeling good about 2010 but would be remiss if I did not pay attention to movements in the larger world economy. Greece’s need for a financial bailout from the rest of the European Union as well as concerns about Spain and Portugal raise existential concerns about the Euro itself. China’s powerhouse comeback in 2009 may be resulting in an inflationary hangover in 2010. The US, though providing good economic news (retail sales increasing a ½% over last year in January, the third increase in three of the last four months), is struggling with a decline in consumer confidence. 

As Bloomberg News put it in an article entitled: “US Economy: Retail Sales Climb, consumer confidence slips”: January sales at U.S. retailers climbed more than anticipated, while consumer confidence unexpectedly fell this month from a two-year high, showing a recovery in household spending may be gradual.”

Bottom line, look for the toy industry to grow in 2010; just keep your fingers crossed about the rest of the world.