- Toy sales fall 2 percent in 2018, according to an NPD Group report.
- The closure of Toys R Us stores means fewer shelves for toys to be featured on.
- Nostalgia over the loss of Toys R Us boosts toy sales as the year begins but isn't enough to fuel full-year sales.
Not all was well in Toy Land in 2018.
Sales in the industry fell 2 percent last year as toy manufacturers endured their first Christmas without Toys R Us in more than 60 years, according to a new report.
In the U.S., customers spent $21.6 billion on toys last year, less than the $22 billion shelled out for action figures, dolls and games in 2017, according to market researcher NPD Group.
"After the liquidation announcement of Toys‟R"Us last year, there was a great deal of speculation about what would happen to the industry, with some predicting double-digit declines," Juli Lennett, vice president and industry advisor at NPD Group, said in a statement.
Lennett called the 2 percent decline a "solid performance" considering how much the landscape has changed in the last year. Toys R Us was estimated to account for 10 to 15 percent of all toy sales prior to its closure in June.
Jefferies analyst Stephanie Wissink said NPD's figures imply that toy sales fell 6 percent in the fourth and suggests that retailers were able to recapture about 35 percent of the market share displaced by Toys R Us.
While a number of retailers, including Target, Walmart and even drug stores, expanded their toy sections this past holiday season, there were still far fewer shelves showcasing toys in 2018 than in years prior. The loss of shelf space appeared to disproportionately affect items like plush toys, building sets and sports toys.
Nostalgia over the loss of Toys R Us boosted toy sales in the beginning of the year, but it wasn't enough to fuel full-year sales. First half toy sales rose 7 percent, according to NPD. Wissink said about $650 million to $700 million of toy sales were pulled forward into the first half of the year.
"While TRU recapture was significantly lower than initial forecasts, the gap to expectations is well known and factored into current stock prices," Wissink said in a research note. The focus now shifts to how quickly inventories can be reduced and what the outlook is for 2019.
While Toys R Us stores have been dark for months, a group of former Toys R Us executives have reportedly been reaching out to toy manufacturers to create a comeback plan for the toy brand, according to the New York Post.