Market Inventory Adjustment and Cooling of Inbound Tourists’ Shopping Spree

「The market for toys for infants and young children, in which our company operates, continues to shrink. Although the declining birth rate is one factor, we believe the greatest challenge is that products currently on the market are failing to capture consumers’ needs despite major changes in the values and behavior of households raising children.」

「The market for toys for infants and young children, in which our company operates, continues to shrink. Although the declining birth rate is one factor, we believe the greatest challenge is that products currently on the market are failing to capture consumers’ needs despite major changes in the values and behavior of households raising children.」

「During the current period, the business environment remained weak across the toy market due to higher prices and changes in consumer behavior. In particular, the general toy segment continued to face difficult conditions, especially for traditional toys, as purchasing behavior changed.」

「In March, shipment requests from distributors slowed in line with stagnant markets in Japan and overseas, resulting in sales equivalent to 70.8% of the same month of the previous year.」

「Although the toy market has continued to shrink, we view the cause as superficial changes in the lifestyle behavior and values of adults (parents). We are confident that the Company can rapidly return to a growth trajectory by providing products that address the universal need for children's curiosity, together with effective communications about those products.」

「During the interim accounting period, consumer spending was skewed toward leisure activities and eating out, and the toy market in which the Company operates continued to decline.」

「We believe this was the result of the decline in customer traffic at toy stores. From the consumer's perspective, the underlying issue is a time-share problem: the time spent window-shopping at toy stores has declined relatively as consumers embraced entertainment at home during the COVID-19 pandemic and then shifted actively toward leisure activities and eating out.」

「In the Japanese economy, personal consumption continued to be affected by higher prices in the first half, strengthening households' preference for saving. Spending shifted from purchases of goods, including toys, toward dining and leisure, and the infant and toddler toy market, the Company's main product market, appears to be particularly weak.」

「In Japan, successive price increases for food, daily necessities and related expenses affected consumer spending. At the same time, spending shifted toward travel and leisure, following the resumption of visitor-attracting events in various regions for the first time in 3 years, resulting in difficult conditions for the toy industry as a whole.」

「As restrictions on behavior imposed to prevent the spread of COVID-19 were gradually lifted, consumer spending shifted from toys and play equipment toward going out and dining. In the toy market, sales of traditional toys generally fell below the previous year even during the year-end shopping season.」

「On the other hand, in domestic sales, the toy market surrounding the Company has shown increasing stagnation as consumer spending has shifted toward going out and leisure activities rather than purchasing products. Against this backdrop, we confirmed strong sell-out performance for the Company's products, but due to the reaction to the large volume of repeat orders received at the end of the previous period, cumulative sales for the second quarter fell below the same period of the previous year.」

「Domestic sales showed a downward trend. We believe that the number of units sold declined because prices were raised on some products in the infant and educational toy categories as a measure to improve profitability.」

「The COVID-19 pandemic increased demand for long-selling standard products rather than highly novel new products.」

「In the toy market, few fresh hit products have emerged this year. With the outlook remaining uncertain amid the continuing impact of COVID-19, there is a growing trend toward expectations for long-selling standard products.」

「On the other hand, some products were significantly affected by changes in the operating environment. The 100% Made-in-Japan Rice Toy Series, which had enjoyed strong inbound demand through the previous period, struggled throughout the current period.」

「The <100% Made-in-Japan Rice Toy Series> struggled during the period due to the decline in inbound demand, but in the third quarter, orders began to recover, mainly for birth gifts such as the “Rice Animal Building Blocks Irodori” (¥9,800).」

「Under these conditions, domestic sales held up, led by online purchases, but did not reach the point of adding sales from new products, and sales in every category fell below the same period of the previous year.」

「In the toy market as well, changes in consumer needs that had emerged over the past several years became even more pronounced in the difficult year-end and New Year sales season of the current fiscal year.」

「Domestic sales faced difficult conditions across the toy market, with few hit products or customer-drawing products and average sales of general toys below the previous year during the summer sales season. Although the company was temporarily affected by subdued replenishment orders for its products, orders for standard products, mainly in the infant and toddler categories, recovered in October.」

「Although difficult trading conditions continued across the toy market after the Golden Week sales season, an upward trend emerged around mid-July during the summer holiday sales season. This led to increased shipments ahead of the Obon sales season, mainly of the company's existing standard products in educational toys, infant products and other categories, which tend to generate steady sales.」

「Even in the toy market, where the weakness since the beginning of the year appeared to have abated, buying was restrained during the April sales season as public attention shifted to the exceptionally long holiday period following the announcement of the change to the Reiwa era. The market remained challenging.」

「In the toy segment, the doll market stagnated across companies, contracting by more than 10% year on year in the second half, and the recovery of the company's products was delayed further in line with the market.」

「In domestic sales, oversupply in the doll market, exceeding consumer demand across a wide range of competing products, accelerated during the second quarter and the market remained stagnant. This, together with weather-related factors affecting the bicycle segment and other businesses, became a factor behind the downside in second-quarter results.」

「However, although Japan's domestic toy market, the company's principal market, has been driven by popular games and other products, the traditional toy market has fallen below the previous year and lacks some vitality.」

「During the current fiscal year, turnover of standard products whose prices had been raised by the previous year slowed further. In bicycles, in addition to consumers economizing, unusually prolonged rain, extreme heat, cold spells and other adverse weather conditions compared with ordinary years also affected purchases.」

「In fiscal year 41, although employment conditions and income have improved, consumers have continued to seek lower-priced household goods and other products, and consumer spending appears to remain restrained. Bicycles and other practical products sold by the company have likewise been affected by the need to work through market inventory held at the end of the previous fiscal year during the second quarter, which has been a major factor behind the sluggish growth in domestic sales.」

「The weakness in domestic sales forecast at the end of the previous second quarter continued through the current third quarter. Sales for the first nine months were ¥3.420 billion, up 8.4% year on year, but growth remained within the expected range.」

「The shopping spree by tourists also began to subside, while market inventory adjustment, mainly involving existing products, continued through July, the final month of the second quarter, as the effects of price increases began to emerge. This affected sales in the toy segment.」