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July 28, 2025
Will Toy Shortages Ruin Christmas?
Toy vendors and their retail partners are playing it safe and keeping inventories lean amid tariff uncertainty, raising the likelihood of toy shortages for the holiday selling season.
”It’s a little bit of a black box, but the back half of the year is going to look like,” said Hasbro’s CEO Chris Cocks last week on his company’s second-quarter analyst call. “I think you’re going to see companies like us be cautious on our inventory.”
On the positive side, he said the consumer “tends to be continuing to buy,” citing a recent bounce back in consumer sentiment and few signs of pull-forward buying by consumers in anticipation of inflation. However, he expects tariffs to raise toy prices and retailers to remain cautious with orders.
“I think consumers are going to have a bit of choice because they’re still very promotionally sensitive right now,” said Cocks. “But a lot of hot products are going to likely be out of stock this holiday because we’re just not going to be able to replenish them because we didn’t have the upfront inventory for them. So, like a PLAY-DOH Barbie, a Nano-Mals, a baby Evie – if you’re a mom or a dad, you’re probably going to want to go and buy that early.”
Exposure to China production makes the toy industry particularly vulnerable to tariffs. According to Politifact, the U.S. International Trade Commission’s data shows 78.3% of U.S. toy imports and 85% of Christmas-related imports (such as lights, trees and decorations) are manufactured in China.
The Toy Association, the industry’s trade group, determined the inflation rate for toys, games and play equipment increased 2.2% between April and May, its largest monthly increase in four years, according to the Wall Street Journal.
The WSJ article indicated that numerous toy manufacturers are undertaking layoffs as part of cost-cutting moves to offset the impact of tariffs while retailers are delaying purchasing decisions and avoiding riskier new product launches.
“They’re in a wait-and-see pattern, and that’s incredibly paralyzing for our industry,” Greg Ahearn, CEO of the Toy Association told the business publication.
For the second quarter, trade uncertainties and a shift from direct imports to domestic shipping caused a 16% sales decline in Hasbro’s Consumer Products Segment and a 15% decline in North American gross billings for Mattel. Both companies expect orders from U.S. chains to recover in the second half.
Cocks told analysts, “We expect to make up much of this delayed ordering in Q3 and into Q4 as sales ramp into the holidays.”
Mattel lowered its sales guidance for the year to a growth rate between 1% to 3% versus 2% to 3% previously. On Mattel’s second-quarter analyst call last week, CEO Ynon Kreiz said the change was “purely about general uncertainty regarding consumer demand in the back half of the year.”Kreiz expects Mattel to benefit in the second half by continued healthy momentum for Hot Wheels, UNO and the overall action figure category, as well as some recovery at Barbie and Fisher-Price. He told analysts, “We do expect the toy industry to continue to perform well. We expect it to grow for the year. And again, there is that uncertainty regarding consumer demand, but most of what we see is positive.”
Discussion Questions
What’s the likelihood that the upcoming holiday season will witness a much higher rate of toy shortages than typical?
How does a retailer know if they’re ordering too cautiously or too aggressively within the toy category amid the uncertainty over trade and the consumer outlook?
Poll
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Tom Ryan
Managing Editor, RetailWire
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The “wait and see” issue that Mr. Ahearn references bodes ill for a successful holiday season, and prices will be higher on the holiday items that do make it into stores. Low inventory and high prices will hurt small operators the most.
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The study we just did on retailer responses to the pandemic, does indeed tell us that retailers are postponing orders until they see what’s happening. And these aren’t just the “little guys.”
The truth is, no one can possibly forecast what the holiday season will look like. There are always a few hot license products that take off and shortages will persist.Fantastic Four….winners or losers? Halloween is the harbinger for that stuff (at least on the costume front). But by then it will be late.
Toys don’t have a great margin on a good day, so overbuying ahead of tariffs isn’t a great idea. The payroll expense for re-packing any unsold goods is not something retailers are going to want to face, given that they’re already reducing store hours.
I’m not in the business of predicting what our leader will do. And he could change his mind the next day, anyway, I just know that in the end, it’s not very good for the consumer, and it’s not very good for retailers. Retailers’ job is to plan, sell and analyze. There simply is no way to plan. It’s worse than Covid, because you knew there’d be a pent up demand when things opened up. We haven’t dealt with “the bill” and it’s ramifications yet.
All I can say is, it’s one heck of a mess.
Will toy shortages ruin Christmas? Maybe for vendors and retailers but I’m sure kids will survive. Some parents will run themselves ragged looking for the toy of the moment – that manufacturers will continue to heavily advertise – but others will find toys that are just as good.
And that’s where retailers can help with curated gift guides by age, gender, interests, and more. This season for sure, retailers need to make it easy for shoppers to buy. It’s time for that real in-store personalization we’re always talking about to kick in.
The day after, the kids will forget what they didn’t get and enjoy what they did receive.
Parents can be creative… esp in the winter break. Build a day or trip around the ice skates gifted. Look to create a memory with time together. Homespun ideas… ‘camping’ under the Christmas tree, baking, etc. Shift the focus from volume of stuff. Retailers could help by knowing all the local events & giving suggestions.
Gene, stop making sense!
Get out those ration books!! I don’t know the answer, of course – no one does, that’s the whole point of this thread – but it’s safe to make two assumptions:
The chance for disruption is higher than normal, tho not necessarily the worst we’ve ever seen ; and
Much will be made of the possibility, regardless (Think of the childred!)
2025 is wild, so it’s hard to say how toys will fare. Proactive planning is wise. Retailers that stock in-demand items and parents who shop early will have an advantage this holiday season.
Resale channels are certainly an option for parents to find gifts. Digital will benefit as shoppers look at broader retail options…to find instocks, return policies, coupon codes, cash back links, buyer protection policies.
When Hasbro’s CEO calls the market “a black box” and Mattel cites “general uncertainty,” they’re essentially admitting they’re flying blind. With 78% of toy imports from China, the toy industry’s supply chain has a single point of failure. What’s worse is the cascade effect through decision-making nodes full of uncertainty and irrational system outcomes.
Smaller toy retailers may have more flexibility during this “moving goal post” tariff crisis than large chains. While major retailers are locked into traditional distributor relationships and allocation systems, independent stores can more quickly pivot to alternative sources (like local makers, direct-to-retailer platforms like Faire and Handshake Deals).
Christmas 2025 won’t be ruined; it’ll be transformed as parents pursue more memorable experiences and discoveries. However, large toy chains will need to rethink their tiered distributor relationships and how to compress their decision-making cycles to maximize responsiveness in the face of increased uncertainty.
Reporting from inside the industry, and the independents have moved past panic and are now resigned to disaster. The small to midsize toy companies are running on the fumes of last year’s inventory with many “we’re about to run out of stock so order now” emails going out. Job boards have exploded with layoffs and full-on supplier business closures across the board. Retailer attendance at the ASTRA Specialty Toy event last month was down 30% with many open booths. The little guys – both on the retail and supply sides – have nowhere to turn and the clock has run out. Expect to see many local toy stores closed at year end once Christmas is over.
I myself will be out of a job in September as my Made-in-USA employer shuts down after 57 years. I’ve got 35 years’ experience in toy and education and have NEVER seen such a dire situation in this business.
Holiday toy shortages are nothing new – hot products often run out as retailers and manufacturers struggle to keep pace with demand. However, this year, the situation has been further complicated by tariffs, which have made forecasting demand and managing costs significantly more difficult. As a result, purchasing strategies have become more cautious and elongated, increasing the likelihood of widespread shortages that extend beyond just the hottest items. A successful retail holiday is about planning and execution early, something that tariffs hamper.
For those that may have cried wolf and suggested that toy shortages would ruin the holidays, I think it is safe to assume there will still be plenty for everyone. Sure, some of the new toys and imported toys may be affected by tariffs and shipping delays, I think toy shelves will once again be bountiful.