State of The Industry

NEW YORK—As toy sales in the U.S. retail universe, by most accounts, have been declining over the past few years, there is somewhat of a countertrend in the ranks of the 25 top toy-sellers.

Research by Playthings magazine to rank retailers by toy sales, discovered an uptick in sales by the top toy-sellers as toy sales overall remain on a slow downward spiral.

The top 25 retailers registered $29 billion last year in toy sales, representing an increase of 1.7 percent compared with 2003’s total of $28.5 billion for the same group.

The total amount includes sales of PC and video games as well as youth electronics, a relatively new and increasingly important category to toymakers as well as toy retailers.

On a per store basis, however, toy sales were on trend with the retail universe: down.

The top 25 toy retailers had a net increase of 1,953 doors in 2004, representing a 5.8 percent increase compared with 2003.

And these retail giants sold toys, entertainment and other playthings through 35,483 door fronts last year, as compared with 33,530 doors in 2003. On a net per store basis, then, sales declined about 4.1 percent among the top 25 during 2004.

As with last year’s ranking, Wal-Mart, Toys “R” Us and Target rank as the numbers one, two and three toy retailers.

Top seller Wal-Mart garnered $9.78 billion in toy sales last year, an increase of 10.1 percent compared with its 2003 toy figure of $8.88 billion. The world’s largest retailer and the top toy retailer in the United States alone comprises 34 percent of the top 25, an increase of three percentage points from its 31 percent share in 2003.

As a channel, discount department stores recorded $15.03 billion in toy sales last year, an increase of 7.2 percent from $14.02 billion in 2003. The discount channel accounts for 52 percent of the top 25, up four percentage points from its 48 percent share of the toy market in 2003.

Other leading discount department stores include number three Target, with $2.8 billion in 2004 toy sales, and number six Kmart, with 2004 toy sales of $1.15 billion.

The dollar stores within the discount department store channel include number 22 Dollar General and newcomer to the top 25, number 25 Family Dollar. Together, the two sold $316 million worth of toys in 2004 through a combined 12,920 door fronts.

Number two Toys “R” Us leads the toy specialist category, with 2004 toy sales of $5.98 billion. Mostly due to KB Toys’ Chapter 11 bankruptcy in January 2004, the specialist channel took a hit last year.

As a group, toy specialists recorded combined sales of $7.5 billion, down 12.2 percent from $8.55 billion the previous year. Toy specialists also saw their share of the top 25 decrease three percentage points to 26 percent last year, down from 29 percent in 2003.

The bright spot within the toy specialist channel is number 13, Build-A-Bear Workshop. The St. Louis-based retailer sold $291.7 million worth of toys in 2004, up a whopping 41.6 percent from $206 million in 2003. The specialist is in expansion mode, opening 17 new stores in 2003, 21 stores in 2004, and has plans to open 28 to 30 new stores in existing markets this year. Build-A-Bear officially opened its 22,000-square-foot flagship store in New York City at Fifth Avenue and 46th Street this July.

As a channel, the entertainment and electronics specialists garnered $4.67 billion in 2004 toy sales, up 12.5 percent from $4.15 billion for the same group in 2003. Number four, GameStop, purchased rival, number five, Electronics Boutique in May. Together the two companies sold $3.24 billion in toys last year through 3,252 U.S. stores. The combined company will own approximately 25 percent of the video game market, contending Wal-Mart’s share.

Entertainment/electronics specialists accounted for 16 percent of the Top 25 last year, up from its 14 percent share in 2003.

—Additional reporting by Maria Weiskott