BMO Capital Markets
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BMO Capital Markets

November 24, 2015 09:00 ET

Jobs, Babies May Boost Holiday Season Toy Sales: BMO Capital Markets

- Job creation, wage growth could support consumer spending

- Higher birth rates may give U.S. infant/pre-school toy sales a bump

- Retail toy sales predicted to rise 5 per cent this year

- Board games, interactive figures, outdoor toys, and construction sets predicted to be the big movers

NEW YORK, NEW YORK--(Marketwired - Nov. 24, 2015) - U.S. toy sales may get a bump over the holiday shopping season from an improved job market, higher wages and an increase in the national birth rate (the first since 2007), according to BMO Capital Markets ahead of Black Friday and Cyber Monday.

"It all boils down to job growth," said Jennifer Lee, Senior Economist, BMO Capital Markets. "We expect the security of a steady paycheck is what could drive consumers during the holidays."

BMO Capital Markets experts forecast the following trends ahead of the U.S. holiday toy shopping season:

Jennifer Lee, Senior Economist

  • There are a number of factors that could support consumer spending. Topping the list is the job market. The U.S. created an average of 215,000 jobs in the six months to October: a very solid trend.
  • Moreover, wage growth is finally picking up. Average hourly earnings climbed 2.5 per cent from a year ago in October, the fastest clip in six years. The jobless rate has also fallen to a 7 1/2 year low.
  • Drivers are still paying less at the pumps thanks to low gasoline prices.
  • Home prices continue to climb steadily, bolstering net worth.
  • The U.S. dollar is the strongest currency of all the majors so far this year, driving consumer prices and import prices down and giving consumers more purchasing power.

Gerrick Johnson, Toy Analyst

  • U.S. toy sales are predicted to rise 5 per cent this year - to some USD $19 billion at retail - compared to a 6 per cent estimated rate of growth for the global market which could see some USD $85 billion in toy sales.
  • Despite the general strength in the toy industry, the holiday surge has been late in arriving this year, owing to warmer temperatures. We are confident, though, that missed sales in the toy segment will be made up as we move closer to the actual holidays.
  • Toy sales have been strong for the last two seasons, with better innovation, lower gas prices, rising birth rates, and "toyetic" movies driving consumer purchases.
  • Toy companies are bringing more innovation to market, relying less on retro toys and classics and signaling a willingness to take more risks this year.
  • An increase in U.S. birth rates in 2014 (the first since 2007) could finally provide a tailwind for the infant/pre-school category, a poor performer over the last half a dozen years.
  • BMO Capital Markets believes a parental pushback against screen-based activities (i.e. tablets, phones, and video games) is a benefit to sales of traditional toys, particularly outdoor toys, construction sets, and arts & crafts.
  • Bringing families together is a trend that is growing stronger in 2015, helping sales of traditional board games grow by double digits.
  • Interactive figures like Skylanders, Disney Infinity, and LEGO Dimensions continue to be strong - proving that toys and technology do not need to be mutually exclusive.
  • Construction toys continue to perform well, with other top trends in toys being robotics, drones, STEM, small collectible figures, and make-your-own food.
  • The Star Wars Episode VII movie dominates the headlines - but with a December 18 movie release, sales of Star Wars toys have, thus far, been limited mainly to adult collectors.
  • Fashion dolls and plush are the weaker performing categories in the toy industry right now.

About BMO Capital Markets

BMO Capital Markets is a leading, full-service North American financial services provider. With more than 2,300 employees operating in 29 locations, including 16 in North America, BMO Capital Markets offers corporate, institutional and government clients access to a complete range of investment and corporate banking products and services. BMO Capital Markets is a member of BMO Financial Group (NYSE:BMO)(TSX:BMO), one of the largest diversified financial services providers in North America, with total assets of CDN $672 billion as of July 31, 2015, and more than 47,000 employees.

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