Star Wars Toys Power a Strong First Half of 2016; But What About the Second Half?

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"Bottom line, I like NPD's good news and hopeful prediction, but a 7% increase in 2016? I don't think so; more like 4 to 5%.

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There is great excitement around NPD's announcement that the toy industry enjoyed a 7.5% increase in the first half of 2016. Not only that, NPD is projecting that the industry could hit a 7% increase for the year which would make 2016 the biggest year for the toy industry since 1999.

Why did it increase? According to NPD: "Star Wars was the biggest contributor to the industry’s mid-year growth, with dollar sales for Star Wars toys increasing nearly 200 percent through June."

But then they said something that caused me to take pause: "With two-thirds of toy sales yet to come in 2016, Star Wars could be even bigger this year than last.” 

I respect NPD but I am going to pour cold water on that  prediction.  I am not so sure that Star Wars is going to continue to bring the same level of sales.  I have checked in with some of my industry contacts to see if they are in alignment with my thinking.

Gerrick Johnson, an Analyst with BMO Capital Markets Corp.'s Equity Research Group, made two very interesting points:

  • The first half of the toy selling year always generates far less revenue than the second half. Therefore, the Star Wars numbers are having an outsized impact when compared to the first half's relatively low revenue number.
  • There was little in the way of Star Wars shipments during the first half of 2015. Therefore, first half 2016 figures are all new sales with little in the way of Star Wars comparables.

Matt Hudak of Euromonitor tells me that: Star War sales during the first half of 2016 benefited from carry over excitement as the movie did not release until December of 2015.

In addition, from what I am hearing, Star Wars sales have slowed, particularly with children.

Is there a caveat? Yes, there is. Matt also points out that  "Rogue One: A Star Wars Story," releases in December of 2016. That could, of course, have an impact but from what I read it is dominated by new characters. In addition, BB-8 is, if you can describe a robot this way, charismatic in the same way that C3PO and RD2 were. I would be surprised that this movie has anything that can compare.

Bottom line, I like NPD's good news and hopeful prediction, but 7%? I don't think so; more like 4 to 5%. 

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