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Toys War Heating Up This Holiday Season

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The void created by Toys “R” Us has opened up a new war zone for retailers. With the holiday season approaching, retailers are leaving no stone unturned to make the most of the opportunity. Also, online orders for toys are likely to jump, with e-commerce companies like Amazon.com Inc. (AMZN - Free Report) leading the race.

This has resulted in both brick-and-mortar stores and e-commerce companies bolstering their toy, baby and game sections ahead of the holiday season. However, tariffs could play spoilsport as majority of the toys sold in the United States are made in China. 

Retailers Ramping Up Their Toy Sections

Earlier this year, Toys “R” Us said that it would be going out of business. And now with the holiday season approaching, the war seems to be intensifying with all major retailers rushing in to fill the void. The iconic toymaker accounted for roughly 12% of domestic toy sales in 2017, per market tracking firm The NPD Group.

Walmart, Inc. (WMT - Free Report) recently said that it has increased the number of toys by 30% in its stores and 40% online. The company is expected to bank on the popular Ryan’s World collection along with the collection of Fortnite toys, which debut on Dec 1.

Target Corporation (TGT - Free Report) has almost doubled the space of its toy departments this year, adding 250,000 square feet. Target said that more than 500 of its stores will feature extra space to display its toys. Party City Holdco Inc. (PRTY - Free Report) , which is more popular for party supplies, started opening 500 temporary Toy City locations in September, which will stay open through the holidays.

The Kroger Co. (KR - Free Report) is trying to cash in on the Toys “R” Us nostalgia. The grocery chain has entered into a partnership with the hedge fund owners of Toys “R” Us brands to bring back Geoffrey’s Toy Box section. Understandably, all retailers are trying to make the most of the estimated $27 billion domestic toy market. Target has a Zacks Rank #2 (Buy), while Walmart, Party City, Kroger and Amazon each carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amazon Changing the Toy Space

Online orders for toys are likely to balloon this year, thanks to the likes of Amazon. On Nov 5, the e-commerce giant announced that for the first time it will offer free shipping to everyone and not only Amazon Prime members, through the day before Christmas, with no minimum purchase required. Earlier Prime members were required to shop for minimum $25 to qualify for free shipping.

Per a survey by research firm Gartner L2, Amazon topped search results for 95% of toy products, while Target and Walmart products float to the top for 60-80% of the search items. Amazon also released its first ever 67-page holiday toy book ad scan ahead of the holiday season.

Tariffs Might Hit Toy Market

Trade disputes have been denting the confidence of retailers.  The trade war with China could hurt the toy market in the days to come, given that 85% of the toys sold in the United States are produced in China.

Toy makers fear that another round of tariffs is likely to push up the price of toys.  That said, the demise of Toys “R” Us has definitely opened up a great opportunity for others and toy sales are definitely going to help these retailers this holiday season. 

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