Toys were an especially hot seller this year on Black Friday and Cyber Monday amid a wave of amazing discounts by retailers. Unfortunately for ailing discounter Kmart, deal-seeking parents likely bought toys for their children elsewhere due to the chain's mostly noncompetitive prices as compared to the largest toy sellers around.
Kmart, which is owned by Sears Holdings (SHLD) , had toy prices that were 6.5% more expensive than digital juggernaut Amazon.com (AMZN) - Get Report on Black Friday, and a whopping 11.9% pricier on Cyber Monday, according to data from Bloomberg Intelligence. Kmart's price gap on toys with Walmart (WMT) - Get Report during the two most critical shopping days of the year wasn't much better. Bloomberg Intelligence points out that Kmart's toys were 10.8% more expensive than Walmart on Black Friday, and 8% pricier on Cyber Monday.
So much for Kmart partaking in what looks to be a bumper holiday season thus far in toys.
"Our store checks indicate one of the better weekends for toys that we've experienced in the post-recession era, especially when we consider the shift to digital has pulled some shoppers out of the store," says BMO Capital Markets analyst Gerrick Johnson. "Toys 'R' Us had the most foot traffic of the 'Big Three' U.S. toy retailers, likely because it had the broadest array of door-buster and Black Friday deals," Johnson said. Walmart has had a solid showing on toys as well since Thanksgiving Day, he added.
Target (TGT) - Get Report had the least-trafficked toy department from Thanksgiving Day through the long weekend as shoppers likely took advantage of some stellar early deals from the retailer, says Johnson. The company held a promotion for 20% off all toys and games from Nov. 20 through Nov. 23. From Nov. 24 to Nov. 26, Target offered a deal to buy one and get one 50% off on brands such as Disney (DIS) - Get Report Princess and Hot Wheels by Mattel (MAT) - Get Report .
Given the state of Kmart's toy business before the holidays and efforts by rivals to enhance what they sell, it's not surprising executives likely opted to keep prices higher than the competition for Black Friday and Cyber Monday. In short, the chain needs to suck every last dollar from its sales.
Jakks Pacific (JAKK) - Get Report CEO Stephen Berman said on an October conference call the toy maker has opted to halt shipments to a "major U.S. customer that is experiencing challenges" to reduce risks to Jakks. The major U.S. customer is reportedly the financially strapped Kmart discount chain, according to the Wall Street Journal.
As TheStreet has reported, toy makers fearful of not getting paid by cash-deprived Sears may be rethinking how much they ship to the beleaguered retailer throughout the holiday season amid reports of a possible post-holiday bankruptcy filing.
"The mood in the toy industry is upbeat after two strong years of growth and a good start to 2016. The only concerns in the toy industry are minor ones: whether to ship to a troubled Sears/Kmart organization and if Hanjin shipping containers will be unloaded on time," Johnson wrote in October.
"We can tell you that we have had longstanding relationships with our tens of thousands of suppliers and vendors. We want our customers and members to know that we plan to offer a wide variety of the hottest toys, games, and exclusive deals in our stores and online that will excite kids of all ages this holiday season," Sears spokesman Howard Riefs said via email to TheStreet.
Nevertheless, the discounter's toy department has been lacking in the wow factor seen at other stores, based on TheStreet's tours of Kmart stores on Long Island, N.Y., since Thanksgiving Day.
Kmart's toy aisle on Black Friday.
We haven't stumbled across a single Hatchimal, which has morphed into this holiday season's surprising runaway toy hit. The toy doesn't even appear on Kmart's website. The stores have lacked the impressive selection of Hasbro's (HAS) - Get Report hot-selling Nerf guns seen at Toys "R" Us and, to a lesser extent, Walmart. Some of the most eye-popping new Power Wheels cars for kids such as the Cadillac Escalade have been non-existent, as have the cheap giant stuffed bears being snapped up at Walmart and Target.