David Simpson
Industry Analysis
August 21, 1998

Economic Indicators Point Towards a Bullish Season in the Toy Industry

A common starting point in analyzing any industry is to focus on the trends of high level factors impacting all participants in the industry. This top down approach highlights economic and social factors that will alter the economic health of virtually all companies in the industry. Once this context is established, we can confidently undertake the analysis of any individual company within the sector. This analytical framework is vital whether you are a fund analyst, individual investor or an employee in the industry.

Two demographic factors are dominant on the toy industry landscape.

• First, the toy marketplace represented by young people in the US is currently in expansion. From 1993-2000, the number of children aged 5-13 will rise 9.1% while the youth aged 14-17 will rise 13.5%.
• Second, the number of households with both parents working is also at the highest level ever. To put it in perspective, in 1975 only 37% of married-couple families with children had both parents employed. Today that number is over 60% resulting in greater discretionary income.

The combination of more consumers with more money signals robust revenues for the toy industry well into the next millennium.