As toymakers hit the home stretch of the annual global trade show circuit that kicked off in Hong Kong in early January, wended its way through London and Nuremberg and ends with next week’s Toy Fair in New York, the impact of the Coronavirus on production in China and sluggish holiday sales in the U.S. are two factors contributing to an uneasy feeling for the industry as a whole.

Mixed message

The financial news from manufacturers has been mixed. While Hasbro reported a 3% Q4 revenue increase Tuesday, Spin Master earlier cut guidance on Q4 sales, and Funko last week released softer-than-expected preliminary Q4 results. Meanwhile, Mattel this week revealed it closed two Chinese factories last year and plans to close another in Canada as part of cost-cutting moves.

U.S. toy sales fell 4% in 2019, a decrease tied partly tough year-on-year comparisons in the first half to the year-earlier Toys R Us liquidation sales, and partially to a general slump in the 2019 holiday period. Hasbro CEO Brian Goldner noted to analysts that since 2018, there’s been a $200 million decline in U.S. retail toy inventories.

Viral questions

Meanwhile, the Coronavirus outbreak in China continues to vex the toy industry. Hasbro’s supply chain has been “disrupted” amid delays in workers returning to factories and the re-opening of plants, Hasbro CFO Deborah Hancock said. The delays will have a “small” impact on Hasbro’s Q1 earnings, but could jump if factories don’t return to full production by spring, Hancock said.

And, as always, the toy business is adapting to transformative times, whether in terms of technology, intensifying shopper attitudes regarding sustainability, or alignment with changing patterns of how people consume their entertainment.

For example, Goldner said that streaming platforms will fill the void left by the decline of DVDs, which traditionally had provided a bump in film-based toy sales after their release. Recently acquired Entertainment One’s studios will produce films based on Hasbro IP, which will be released for streaming services. “We want to be the partner of choice for these platforms in the future,” Goldner said.