Licensing, marketing and retail expert/opinion leader Tony Lisanti, provides insight and perspective for the top headlines of the week. “Licensing and Merchandising Report” is a must read for top execs who want objective, straightforward and authoritative analysis.
Toys, Licensing, Disney and the Holidays: What it all Means
As the effect of the TRU liquidation lingers and holiday 2018 approaches, there’s still uncertainty about toy sales in Q4, despite strong retail sales and consumer spending.
While The Walt Disney Company’s revenue and earnings reported for 3Q were up 7% and 23% to $15 billion and $2.9 billion, respectively, over last year, the company’s consumer products segment didn’t perform nearly as well. In addition, there was a strong emphasis during the analysts call on Disney’s plans for its streaming service set to launch in late 2019, along with the 21st Century Fox acquisition that perhaps overshadowed the performance of its licensing business and retail stores.
The focus from entertainment execs and investors was on what the new streaming service will feature exactly and how much will be invested in new content, neither of which the company outlined specifically.
For licensing execs, however, the focus should be directly on the DCPI segment, which reported a decline in revenue of 8% and operating income of 10% to $1 billion and $324 million, respectively.
According to Disney “the decline in licensing was driven by lower revenue from the sale of Spider-Man and Cars merchandise, as both properties benefitted from theatrical film releases in the prior year, partially offset by higher revenue from Avengers merchandise.”
But the key comment of concern: “We expect some of the headwinds that impacted our consumer products business in Q3 will also impact the business in the fourth quarter.”
While the streaming service, acquisition and ESPN are all worthy of discussion and certainly critical for the company overall, the real concern here for Disney—the benchmark for the entire licensing sector—is the overall consumer products business. There are numerous key factors and trends impacting retail and licensing despite strong retail sales, and beyond what Disney cited in its earnings call, that will continue to impact the toy business in the near term for Holiday 2018 and beyond. If Disney is facing a decline in sales of licensed merchandise, perhaps its challenges are also being experienced by other licensors and licensed products particularly in entertainment, toys and character, which combined to make up the largest percentage of retail sales of licensed merchandise. Consider the following:
- The liquidation of TRU. Despite the rise in toy sales in the first half of 2018, according to NPD, the impact of TRU’s absence in the marketplace continues to linger and create uncertainty. It will likely impact retailers and toy companies to varying and in various niche categories for several more quarters.
- The liquidation of TRU and the bankruptcy of other key retailers are changing shopping habits, and this will be clearly evident in Q4.
- The continuing growth and popularity of Amazon, and its plans for a holiday toy catalog, will have a decided impact on overall retail sales as well as licensed merchandise.
- The decline of mall traffic is certainly impacting Disney’s more than 200 U.S. stores, but the specialty retailer to focus on various promotions and its position as a destination retailer to drive traffic.
- Party City’s entry into the toy sector with 50 “Toy City” stores scheduled to open in September, will have also influence toy sales, shopping habits and licensed merchandise depending on assortments, inventory and marketing.
- Toy merchandising initiatives by Wal-Mart, Target, Best Buy, JC Penney and several other retailers vying for a share of retail sales in the post TRU marketplace will also further fragment toy sales and licensed merchandise by category. In-stock positions, price and availability of “hot” toys at these retailers will also determine results and consumer attitudes.
- Furthermore, considering Disney’s Q3 CP results and the loss of TRU, could there be a superhero maturation occurring among consumers as well as for licensed toy merchandise.
As Holiday 2018 quickly approaches, all these factors will influence consumer buying decisions especially the loss of TRU. Regardless of any other element of the toy retailer’s strategy or the reasons behind its demise, TRU was unequivocally the “go to” toy retailer, the driving factor behind hot products and especially for licensed merchandise, for the holiday season and Q4.
While Disney is the only licensor with its own stores, the retailer’s scale is nowhere near that of TRU nor the grassroots merchandising impact it had on holiday toy sales.
Furthermore, TRU served as a showcase of sorts for almost every hot toy of the year and even if consumers didn’t buy their toys in TRU, the retailer definitely influenced major purchases at other retailers.
There’s no doubt that the first holiday season without TRU will affect sales and greatly influence purchasing decisions, for basic toys as well as licensed merchandise.
The Biggest Licensing Deals of the Summer
Here are five licensing deals recently announced that will drive significant sales and the summer isn’t over yet.
IMG’s Eye for Brands
IMG will handle licensing and merchandising for Netflix’s Queer Eye, a reboot of the Bravo series “Queer Eye for the Straight Guy” which first aired in 2003. IMG and its vice president of licensing, Gary Krakower, will be working with Scout Productions and its cofounder, and show creator David Collins. The program will include products, experiences and collaborations including fashion and accessories, home design and décor, health, beauty and grooming, food and wine, and culture and travel.
Walmart’s Celeb Deal
Walmart announced it will launch a new fashion brand in September with celebrity Ellen DeGeneres.
According to Denise Incandela, head of fashion, Walmart eCommerce U.S., “Great design, positivity and inclusion” comprises the inspiration for the new fashion line, which will feature 60 items, ranging from denim and tees to accessories and footwear.
“The core of the EV1 collection is denim—an iconic American staple. We, along with Ellen, wanted to make a line that worked for everyone (EV1). Designed to be effortlessly stylish, EV1 was inspired by Ellen’s own confidence and optimism (think tees with inspirational sayings, elevated denim and, of course, fantastic sneakers). It’s cool, fun and accessible,” says Incandela.
The new brand is part of Walmart’s ongoing strategy to transform and improve its fashion business.
Endemol Shine’s New Brand
Endemol Shine North America announced that it will develop licensing and partnerships for The Miss Universe Organization and its brands Miss Universe, Miss USA and Miss Teen USA.
According to Tamaya Petteway, senior vice president of brand and licensing, ESNA plans to develop on-air integrations, off-channel sponsorships and promotions, digital initiatives and licensing extensions including consumer products, gaming, live events and experiences. Key categories will be Health and wellness, beauty and lifestyle, apparel and accessories.
Coca-Cola’s Fashion Collab
Coca-Cola and Kith unveiled its third capsule collection that features 60 products including jackets, hoodies, T-shirts and summer accessories for men and women. The line also included a collaboration with Converse for white denim rendition of the classic Chuck Taylor All Star ’70 sneakers, socks by Stance and a YETI Roadie 20 cooler.
The line once again leverages both Coca-Cola’s iconic logo and image along with Kith’s popularity as a fashion leader.
NFL’s Run with Carhartt
Carhartt and ’47 have partnered with the National Football League for a limited-edition headwear assortment. The Carhartt x ’47 product line features Carhartt’s duck fabric in brown, navy and classic black with NFL team logos.
In the Aisles: Nella the Princess Knight
Here’s a look at Target’s exclusive merchandising deal with Nickelodeon for its hot property Nella the Princess Knight. The collection, introduced a few weeks ago, features toys, role play, apparel, home décor and more. Target devotes end cap, plus most of an aisle to the kid’s brand.
Good News for Cherokee
Cherokee Global Brands announced a new $40 million three-year financing agreement with Gordon Brothers Finance Company and Gordon Brothers that will allow the global licensor to expand its retail presence and brand licensing deals. “Completing this refinancing on favorable terms marks a significant step forward for the company and our global licensing partners and shareholders,” commented Henry Stupp, chief executive officer of Cherokee Global Brands. “The new facility increases our financial flexibility, adding over $5 million in liquidity which will support the company’s ability to realize its strategic objectives.”
Best Buy Expands Health Care Offerings
The electronics and tech retailer Best Buy announced the acquisition of GreatCall, a leading provider of connected health and personal emergency response services, for $800 million in cash.
The deal expands Best Buy’s position and commitment to the health care tech and wellness category and helps the retailer to target the nation’s aging population, which will continue to grow for many years. It also gives the retailer a more competitive position and opportunity against the leading drug store chains as well as Amazon and Walmart.
GreatCall’s products and services include: Lively Mobile, Jitterbug Flip, Jitterbug Smart, Lively Wearable, Lively Home and health, safety and wellness apps Urgent Care, GreatCall Link, MedCoach and 5Star Urgent Response Service.