Is Toy Nation Recession Resistant? Some think so. - Out of the Toy Box

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Richard Gottlieb

Is Toy Nation Recession Resistant? Some think so.
October 9, 2008

Some of the leading financial analysts who cover the toy industry are pointing out that we are, at least to a degree, recession resistant. Paul Whitfield, in Investors Business Daily, stated in an October 7, 2008 article that: “The toy sector traditionally resists recessions. Most people aren't willing to cut back much on holiday gifts for children. That isn't to say toys are recession-proof, just resistant.”

The article, entitled, “Analysts Expect Upturn for Mattel in Quarters Ahead,” goes on to say: “Mattel's (MAT) stock peaked in April 2007. A series of recalls followed but have since faded. It won't be too surprising if Mattel recovers before the general market does. When the economy begins to turn, many people may celebrate first by splurging on kids or grandkids.”

He is not the only one who is of the opinion that toys are recession resistant. Gerrick Johnson, a financial analyst with BMO Capital who specializes in the toy industry says in his Third Quarter Preview: “We think business remains challenging for toy makers.” He goes on to say, however, “…as the dust settles after the market melt down, we could see multiple expansion for what is known as a defensive sector and industry.”

A “defensive sector or industry” consists of products that are not affected by people’s ability to buy. Essentially, that means that anything in the refrigerator, the medicine cabinet, and yes, the toy box, is recession resistant.

Posted by Richard Gottlieb on October 9, 2008 | Comments (1)

October 12, 2008
In response to: Is Toy Nation Recession Resistant? Some think so.
Kim Vandenbroucke commented:

I agree with you Richard. First of all, because Christmas will always come there will be a couple bucks set aside to ensure Santa visits good little boys and girls. And while consumers may not spend as much as they did in years of "Feast," Christmas still arrives every December 25th even in years of "Famine." On a similar note, I've been reading Phil Orbanes' book "The Game Makers: The Story of Parker Brothers" and Phil shares that when the Great Depression hit George Parker noted that game sales didn't drop even though people were out of work. While there wasn't a huge market for big ticket items like cars, games were still in demand. And why not? A fun, exciting item with immense repeat play value provides a great ROI especially when money is tight.