With consumers focused on experiences and retailers buying more cautiously (and reducing toy orders for November and December), suppliers are forecasting a mid-single digit percent decline in annual sales.

Research firm Circana reported an 8% decline in toy sales through September. Spin Master cut its projection to a mid-single digit decline after forecasting flat sales earlier this year. And Funko took a $6.4-million charge against Q3 earnings, largely tied to factory orders being canceled. It also booked a $2.4 million reserve related to prepaid royalties that won’t be recovered through sales, Funko CFO Steve Nave said.

“Consumers are under pressure and while consumer spending remains high overall, they are allocating their spending to travel and experiences,” Spin Master CEO Max Rangel said. “Toy industry sales for October were disappointing and well below retailers’ plans.”

At Jakks Pacific, posting a sales increase against 2022 revenue was an “impossible feat” given the company lacked a breakout hit property, CEO Stephen Berman said. Its overall dolls, roleplay, and dress-up sales were down 27% in Q3, and that is despite doll sales having increased to $247 million in the nine months through September 30. Jakks’ costume business reported a 19% increase in Q3 sales but was down 9% ($122 million) through nine months. The company’s Q3 sales to its top retailers, including Walmart and Target, decreased “in the high single digits,” Berman said.

Moving forward, many toymakers are focused on launching new lines. Jakks is readying a range of outdoor products (including canopies, roller skates, and volleyballs) as well as dolls and doll accessors under Authentic Brands Group’s Forever 21, Juicy Couture, Prince, Sports Illustrated, and Roxy brands. It also recently signed a licensing agreement with Disney’s 20th Century Fox Television for The Simpsons with plans to develop collectibles and plush.

Even as toy companies develop new product offerings for 2024, they also are preparing aggressive pricing strategies for the 2023 holiday selling season to clear remaining inventory, company executives said. Spin Master, for example, is developing 40-50 SKUs designed to be sold at lower prices. According to Rangel, that is something of a “white space” for the company.

The companies are also expanding distribution in areas that might help offset any decline in retail. Funko posted a 32% increase in direct-to-consumer (DTC) sales in Q3. DTC accounted for 17% of Funko’s Q3 revenue, up from 11% a year earlier. Additionally, Funko’s newly acquired Mondo recently sold 3,500 units of a Masters of the Universe Battle Cat figure ($500), while the average order on its website rose 8% to $60 in Q3.

Spin Master, meanwhile, reported $15.6 million in distribution revenue from Paramount’s new Paw Patrol film with related toys expected to be released in 2024. And with its animated series Unicorn Academy comes a major push for licensing starting next year with products to follow in 2025, CFO Mark Segal said.

“This business is built brick by brick, a series of evergreen brands and categories centered around classic play patterns that we feel persist and stand the test of time even in the increasingly digital world,” Berman said. “These businesses have an underlining content presence, and it only adds to our ability to stay top of mind with consumers and participate in the energy and excitement around top-tier content.”