Toy Shoppers Come Down With a Case of the Holiday Blahs

Shoppers couldn’t get enough toys and games during the pandemic. Now, they are finding other ways to spend their time, and that is spelling trouble for toy makers and sellers.

Sales of toys have slumped so far this year, down 8% through September compared with the same period last year, according to market-research firm Circana, and appeared poised to be lacklustre this holiday season. Imports of toys and games have fallen sharply this year and sales at toy stores, department stores and other gift sellers declined in October, leading a broader pullback.

A retrenchment on the most fun-to-give gifts sends a signal that Americans are starting to ease their spending more broadly as pandemic savings dwindle, the labor market softens and shoppers worry about global events and still-elevated inflation. Easing consumer spending would cool overall growth, because it accounts for more than two-thirds of economic activity.

This holiday season is off to a slow start for Wildlings Toy Boutique in Phoenix, which sells classic toys dollhouses and wooden cars and accessories. The store has been trying to drum up customer interest with experiences, including Santa visits and family photo shoots in front of a Christmas-tree backdrop outside the store.

“I think people are reluctant to spend as much and to spend as early,” said owner Jennifer Mawcinitt, who expects people to come in looking for deals on Black Friday.

Larger retailers are seeing similar trends.

Customers are “showing ongoing discretion and making trade-offs to be able to afford the things they want, given the sustained high cost of the things they need,” Walmart Chief Financial Officer John David Rainey told analysts last week.

Experiences valued over things

Early in the pandemic, when many were unable to travel and dine out, Americans shifted their spending toward goods, including toys, games and electronics. That has reversed.

Spending on services has grown roughly double the pace of goods for most of this year as consumers caught up on experiences such as concerts and trips to Europe.

Fewer board games and puzzles are coming off toy store shelves because “people are going outside,” said Katherine Nguyen, owner of Building Blocks Toy Stores, which has three locations in Chicago.

Nguyen is seeing an exception: Shoppers can’t wait to get their hands on toys they can squeeze, such as the Bitzee digital pet and Squishable plush toys. “I don’t have a store big enough to sell” all the stuffed animals now in demand, Nguyen said. She added that those toys are popular in part because they are geared toward social and emotional self-care as children navigate post pandemic life.

Hannah Sweet, a retired care manager in Tiburon, Calif., said she is more cautious about spending this holiday season than in previous years, pointing to concerns about an economic downturn. Economists surveyed by The Wall Street Journal last month put the probability of a recession in the next year at essentially a coin flip.

“I am prioritising gifts to children and grandchildren,” said Sweet, 81 years old. Still, she recently took a trip to Germany and next year plans to go on a river cruise in Europe with family. “It’s important to travel while I can,” Sweet said.

The National Retail Federation, a trade group, expects November and December holiday spending to rise 3% to 4% this year from last, or hold about flat when factoring in inflation. That would be slower than a 5.4% increase in 2022 and a 13% rise in 2021.

Expecting potentially weaker demand, retailers and other sellers ordered fewer toys and other popular gifts from overseas. U.S. imports of toys, games and sporting goods dropped 21.5% in the nine months through September, compared with the same period a year earlier, according to the Commerce Department. Bicycle imports fell more than 40%; smartphones declined 16%.

Toy companies struggled to clear out bloated inventories in 2022 after supply-chain snags left retailers with extra stock. Barbie maker Mattel warned that rising prices across the economy and high borrowing costs would likely continue to dent demand for toys this holiday season. Chief Executive Ynon Kreiz said last month that overall industry sales would fall by a mid-single-digit percentage for the full year.

Hasbro, the maker of Monopoly, Play-Doh and Transformers action figures, reported a 10% drop in revenue in the third quarter and cut its full-year guidance because of weak demand.

“We have a cautious outlook on the holiday,” Hasbro Chief Executive Chris Cocks said on a call with analysts. “And I think anyone who says they know how the holiday is going to go, they must have a crystal ball because this has been a tough one to predict.”

Hasbro expects consumers to wait longer to make their purchases and to look for more deals. Some deals are already emerging. Toy prices fell nearly 4% in October from a year earlier, the Labor Department said.

Consumer concerns emerge

Shoppers are facing a number of headwinds that threaten to curtail holiday cheer this year.

Hiring slowed sharply in October and the unemployment rate has risen this year. Paying down credit-card bills is more difficult with interest rates at two-decade highs, and student-loan payments resumed for millions of borrowers. Consumer sentiment in November fell to the lowest level in six months, the University of Michigan said Wednesday.

Americans’ downer attitudes on the economy might not transfer to slashed spending. Many economists saw signs that elevated interest rates would cause consumers to ease up earlier this year. Instead, they spent lavishly, causing economic growth to accelerate.

“Overall, the consumer has been very resilient: that’s why we’re not in a recession,” said Sucharita Kodali, a retail analyst at Forrester.

Nguyen, the owner of Building Blocks, remains optimistic about this holiday season. “People don’t cut out their children,” she said. “Even if they have job insecurity, or worry about food costs,” they still buy gifts for their children, she added.

—Anthony DeBarros contributed to this article.

Reporting season has once again reminded investors that a strong profit does not guarantee a rising share price, and a large loss does not always trigger a sell-off. What matters most is how each result compares with expectations and, increasingly, what management says about the year ahead. During the August 2026 season, companies offering credible turnarounds or unexpectedly strong guidance were rewarded handsomely, while those flagging weaker margins, slowing demand or greater uncertainty were punished.

The following ranking draws on Morningstar’s review of 164 ASX-listed companies and measures each company’s share-price movement on the day it reported. This captures the market’s immediate response to the earnings announcement, before subsequent economic developments, dividends and company-specific news cloud the picture. Here are the five biggest winners, and the five hardest-hit losers, of the season so far.

The five winners

1. Bapcor (ASX:BAP): +41.0%

Bapcor delivered reporting season’s largest relief rally after presenting early evidence that its troubled automotive-parts business was stabilising. Although underlying revenue fell 1.8% to $1.92 billion and underlying NPAT collapsed 85% to $10.8 million, underlying EBITDA of $152.5 million exceeded guidance.

More importantly, working-capital initiatives released $68.5 million in the second half, lifting cash conversion to 109.4% and reducing net debt by 63% to $135 million. The statutory loss was $431.6 million, largely because of non-cash impairments. Investors focused on improving operational momentum, stronger liquidity and management’s expectation of modest FY27 revenue growth.

2. Zip Co (ASX:ZIP): +18.2%

Zip comfortably surpassed its FY26 targets, sending the buy-now-pay-later provider’s shares sharply higher. Transaction volume rose 23% to $16.7 billion, while cash earnings before tax, depreciation and amortisation jumped 58% to a record $268.9 million. Statutory profit climbed 46% to $116.4 million, and the cash operating margin expanded by 4.2 percentage points to 20%.

The strongest signal was guidance for FY27 cash earnings of $340 million—around 26% growth and above analysts’ forecasts. US transaction volume increased 42.5% and now represents three-quarters of group volume, offsetting weaker customer activity in Australia.

3. CSL (ASX:CSL): +17.3%

CSL’s result was hardly spectacular in isolation, but it cleared a market bar that had fallen dramatically following earlier downgrades and restructuring announcements. Underlying NPATA was US$3.1 billion, down 2% in constant-currency terms, while operating cash flow reached US$3.51 billion.

CSL maintained its full-year dividend at US$2.92 per share and completed a A$1 billion buyback. The real catalyst was FY27 guidance for approximately 5% underlying profit growth, compared with market expectations closer to 2%. After an extended period of earnings disappointments, investors interpreted the outlook as evidence that CSL’s core plasma business was approaching a sustainable recovery.

4. Judo Capital (ASX:JDO): +16.9%

Judo Capital demonstrated strong operating leverage as its specialist business-lending franchise expanded. Full-year profit before tax rose 34% to $168.1 million, while pre-provision profit increased 42%. Gross loans and advances grew 18% to $14.7 billion, reaching the top of the bank’s guidance range and comfortably exceeding broader system growth.

Deposits increased 24% to $12.2 billion, return on equity improved by 1.1 percentage points to 6.4%, and earnings per share rose 29% to 9.9 cents. Reaffirmation of the FY27 outlook gave investors confidence that loan growth could continue without sacrificing margins or credit quality.

5. Super Retail Group (ASX:SUL): +15.8%

The owner of Supercheap Auto, rebel, BCF and Macpac reported record sales of $4.2 billion, up 3.2%, despite cautious discretionary spending. Profitability went backwards: normalised profit before tax fell 7% to $306 million and normalised NPAT declined 2.8% to $226 million as transformation spending weighed on margins. Nevertheless, the result exceeded subdued expectations, online sales grew 5.3% and membership across the group’s loyalty programs reached 13.1 million. Investors were also encouraged by positive early FY27 trading, stable gross margins and continued market-share gains. A fully franked 33-cent final dividend added to the appeal.

The five losers

1. Hansen Technologies (ASX:HSN): –21.2%

Hansen’s historic result met expectations, but investors recoiled from its outlook. The utility and communications software provider achieved an underlying EBITDA margin of 31%, exceeding its 30% target, while generating strong cash flow. However, management designated FY27 an “investment and transition year”, signalling a roughly five-percentage-point margin contraction as spending on products, sales capabilities and organisational changes increased.

Revenue had already been broadly flat, leaving investors concerned that the investment program would depress earnings before new growth appeared. Leadership changes, including the chief executive’s departure, added uncertainty. Management expects revenue growth and margins above 30% to return in FY28, but the market was unwilling to wait.

2. Life360 (ASX:360): –19.4%

Life360’s headline growth was impressive: quarterly revenue rose 38% to US$159 million, subscription revenue increased 31%, and adjusted EBITDA climbed 53% to US$31.1 million. Monthly active users reached 102.4 million and paying circles grew 27% to 3.2 million. The sell-off reflected expectations rather than a collapsing business.

Net income fell 18%, the net margin contracted from 6% to 3%, hardware shipments dropped 18%, and full-year EBITDA guidance was merely maintained. After a strong valuation run, investors wanted a larger upgrade and clearer evidence that heavy investment in advertising, international expansion and artificial intelligence would generate additional earnings.

3. PEXA Group (ASX:PXA): –17.0%

PEXA reported a 7% increase in continuing-operations revenue and 12% EBITDA growth to $152 million, accompanied by a two-percentage-point margin expansion. Free cash flow increased 39%, suggesting the core Australian electronic-conveyancing platform remained highly profitable. Investors instead concentrated on management’s warning that property-transfer volumes could decline, alongside regulatory uncertainty surrounding the fees PEXA can charge.

The company is also continuing to invest heavily in its loss-making international expansion. Morningstar considered the market reaction excessive, arguing that structural transfer-volume assumptions had not materially changed, but the combination of softer near-term activity and regulatory risk overwhelmed the respectable headline numbers.

4. SEEK (ASX:SEK): –14.3%

SEEK produced solid FY26 figures, including 10% revenue growth to $1.20 billion, a 15% rise in EBITDA and 28% growth in adjusted earnings per share. It also lifted its fully franked annual dividend by 13% to a record 52 cents. Those achievements were overshadowed by falling paid job-ad volumes and cautious FY27 assumptions.

The statutory accounts included a $201 million loss from the SEEK Growth Fund and $377 million of significant items, making the headline result considerably less attractive. Investors were particularly concerned that economic weakness could limit volumes while the company continued investing in platform integration and artificial-intelligence products.

5. JB Hi-Fi (ASX:JBH): –12.3%

JB Hi-Fi’s full-year result was broadly respectable, with group sales rising 5% to $11.1 billion and underlying earnings per share increasing 6% to $4.48. The damage came from its current-trading update. Australian sales were almost flat during the June quarter and deteriorated further in July, while earnings in the core Australian electronics business fell 3.6%.

Housing-related categories were particularly weak as higher living costs and interest rates constrained household budgets. With JB Hi-Fi entering the season on a demanding valuation, an in-line historic result was not sufficient: the loss of sales momentum prompted investors to rapidly reduce their expectations for FY27.

Overall, the season showed that share prices react less to whether profits rose or fell than to the gap between results and expectations. Bapcor was rewarded for being less troubled than feared, while several fundamentally profitable companies were punished because their outlooks failed to justify elevated valuations.