Retail misses the mark as Target falls on weak holiday sales. With CNBC's Brian Sullivan and the Fast Money traders, Steve Grasso, Karen Finerman, Dan Suzuki and Guy Adami. Target didn’t have the strong holiday in the toy department that many expected, ringing alarm bells for the entire industry.
The retailer on Wednesday reported its toy sales were about flat over the 2019 holidays compared with the prior year, though it said it continued to gain market share in toys, based on data from NPD Group.
Target shares fell more than 7% on the news, while the report sent Walmart’s stock down more than 1%. Toymaker Hasbro’s shares dropped about 2.5%, while Mattel’s stock tanked more than 6%.
Target’s struggles in toys appear to be part of a much bigger set of problems that the industry is facing. While retailers during previous holiday seasons benefited from hot toys such as Hatchimals and Fingerlings, or a popular entertainment property, 2019 had neither.
“While ‘Frozen II’ gave the toy industry a boost, the lack of other strong hits was often cited for lackluster industry performance,” Gerrick Johnson, analyst at BMO Capital Markets, wrote in a research note last week.
Then there is the lingering pain from the Toys R Us bankruptcy.
Manufacturers such as Hasbro, Mattel and Spin Master are offering a smaller variety of toys and games. When Toys R Us shuttered, toymakers lost a lot of shelf space and also had huge inventory issues. Faced with this new reality, they streamlined their toy lines.
“The chickens are coming home to roost from the Toys R Us bankruptcy,” said Richard Gottlieb, CEO of Global Toy Experts. “You cannot eliminate that many toys from the marketplace (remember TRU had vastly more items) without it having an impact. A great loss of incremental and impulse sales.”
Target is not the only big-box retailer to have faced tough toy sales during the holiday season, said Jim Silver, CEO of TTPM, an online toy review site. He expects Walmart also struggled. The retailer hasn’t yet reported its quarterly holiday sales.
A representative from Walmart wasn’t immediately available to respond to CNBC’s request for comment.
The only true winner this holiday season was Amazon, which continued to grow its share of toy sales, Silver said. The e-commerce site announced the day after Christmas that it had had a “record breaking” holiday season and said toys was a popular department for shoppers, although it has yet to disclose any financial figures for the period.
“E-commerce is continuing to cannibalize brick-and-mortar sales,” Gottlieb said. “Millennials are now parents and they are very comfortable buying online.”
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