China's Currency Value
President elect Donald Trump has accused the Chinese government of currency manipulation. In other words, trying to keep the value of their currency low so that in turn the cost of Chinese goods will also be low. The lower the value the more China can manufacture and export and that means jobs for Chinese workers. Chinese culture highly values stability and that means, at least in part, that the government wants to see people employed.
Ironically, due to the low value of the Chinese currency, money has been flowing out of China. Apparently, the Chinese government is now concerned. Here is how New York Times writer, Neil Gough, puts it in his article, "China, Seeking to Stop Weakening of Currency, Issues Restrictions":
[Chinese] financial regulators in recent days have introduced new rules to curb the amount of capital flowing out of the country, helping to slow the pace of the renminbi’s decline.
They issued stricter rules on the movement of renminbi offshore for conversion into dollars. Analysts also cited worries over reports that authorities were considering restrictions on companies as well.
This bears watching as the value of the Chinese currency, the Renminbi, could go up and that will have an impact on the cost of toys and other playthings.
The Decline of the Shopping Mall
Three major mall retailers, Macy's, Kohls and Sears had challenging Christmases. These stores are major mall anchor tenants and as they go so go the malls or possibly its the other way around. There are a number of shopping malls that have been around for a long time and seen better days. Not only that but the mall was at one time a type of town square. Seniors power walked and families strolled. Then the teens came, crime went up and families stayed home.
How bad is it? Macy's is closing 68 stores and cutting 10,000 jobs. The theory is that they can be more profitable with fewer stores. Accordingly, it is older Macy's stores that are getting the ax.
Keep your eye on Macy's as it may well be a bell weather for the future health of the mall retail industry.
Will Kmart Survive?
Maybe so…but why. It looked like lights out just a few weeks ago but CEO Eddie Lampert announced recently that he is investing $200 million of his own money to keep the company liquid and manufacturers shipping. In addition, the company announced that it was selling its premier tool brand, Craftsman, to Black & Decker. The money from that sales will also be used to fund the company. In addition, Sears is seeking to sell of its Kenmore appliance brand as well.
Again, but why? Kmart stores are consumer deserts and Sears, without its major brands, is irrelevant. Yes, they will survive but will anyone care?
U.S. Foreign Policy
We have a President elect who is aggressively pushing for jobs to stay in the us. As a result, he may well be using foreign trade as a tool in engaging China and Mexico. Whether you agree or disagree with his strategy, the toy industry has a great deal on the line. Should he choose to engage any of these countries, particularly China, in a trade war it will be the U.S. toy industry which may well be the most vulnerable. Very few toys are now made in the U.S. and most are made in China. There will be a scramble to find alternative sources of production but replacing the Chinese toy juggernaut will not be so easy. How do you move 80 + percent of the world's toy production, and and all at the same time?
What are you watching this year. Write in and let me know.