Faefrost

Part of TRU’s normal terms was they get an extended Net 180 on merchandise. So they typically don’t have to pay for it until it’s in most cases sold. This creates some exposure for the toy companies. While suppliers are protected creditors in Bankruptcy, when there is no money, there is no money. Lego’s exposure is known to be about $35 million. Possibly a little more since the Bankruptcy Court provided some assurances for the Christmas season. Mattel is the worst with almost $150 million owed. And once again that doesn’t account for the business damage that that vast pool of unsold stock getting liquidated onto the market does. Lego or Mattel will never see a dime from that. It sucks to be a supplier when a retailer goes under. You get heavily screwed. Your unpaid for merchandise gets seized as a company asset to be liquidated in order to appease top level creditors, typically payroll and pension. You aren’t high enough on the lists to get even pennies on the dollar. And you are now competing with your own, essentially (from your point of view) stolen merchandise that is backed up by Federal Courts. It’s a pretty awful experience. I will say the fact that Lego only has $35 million exposure is a good sign that they saw the writing on the wall and were restricting TRU’s lines and terms of credit since last January. All of the other big players, and even some relatively small ones have 3-5x that much outstanding.

Not to spoil anything... but yeah it does. The look from the Throne Room set makes sense now.

At this point the more critical question will be what or how great an impact will TRU failing and closing have on Lego? No matter how you slice it it WILL have a heavy impact. TRU was the Last dedicated toy store. With acres of Lego selection. That will have some strong ripple effects at Lego and in the industry. Among the negatives is, among other things, Lego is not going to get paid for the current TRU merchandise. Further that merchandise will be out there in the channel somewhere competing with Lego’s new product. So their oversupply problems got worse. Further, from our point of view, the other Big Box merchants, Walmart and Target don’t like the high price, high risk, large $100+ sets the way TRU did. They prefer their lower to mid tier price points. Now long term, so long as this doesn’t lead to a massive crashing of the toy market in general, Lego may actually come out on top. But they will feel more pain, at least for this year. A few points in their favor. - unlike their largest competitors Mattel and Hasbro, Lego years ago widely diversified their retail sales chains. They have an expanding line of Direct to Consumer retail outlets, often in many Malls, plus a robust and refined D2C online store. Not to mention deep proliferation at other refined online merchants, Amazon, Walmart, Barnes&Noble, etc. - As other retailers are ramping up their toy offerings, Best Buy, Kohl’s, JCPenny’s, etc, Lego is the primary toy entry line. So they may actually be seeing some expansion there with lower price point product. This may also be in better or more favorable terms then they were getting from TRU, which demanded net180+ terms on product instead on net 30, 60 or 90. - Lego is a privately held company. Not publicly traded like Mattel, Hasbro, Jakks Pacific etc. Thise companies are already seeing 5%+ stock drops, just from one day of trading, today Friday, after the news leaked Thursday night. Monday is going to be a bloodletting for them. This will hugely impact their cash value, cash on hand and ability to secure financing, and in some cases may trigger a death spiral or a wave of mergers. To my eye Mattel is by far the most exposed. - Pretty much the full range of Lego’s product offerings are available from all merchants. Unlike the others where a retailer may sell one product line, but not another. Lego likely will not see the wholesale gutting of lines in favor of the lowest common denominator the way some others will. It’s going to be a rocky year for all toy fans.

There’s a pretty solid rumor/report that TRU will in fact be entering liquidation in the States.

That is astonishing. Just the shear detail. The amazing volume of perfect parts dedicated to the cause. Everything about it is perfect. (Well okay Master Wu is actually a blonde like Lloyd, but the classic Asian bun works better for your story.)

Wow! I really need to do that!

Is there some story behind that? We know they have a Goat tooling/mold . But only used it for one set Mill Village Raid. It would be real nice to see it again.

The problem with those Star Wars constraction lines is the product is not exiting the channel and is backing up. I was just in my local Target at lunch time. I was looking at the Lego aisle with an eye towards that earnings report. (I’m a Business Consultant, we do this sort of thing as a hobby.) Those construction figures really stood out. In my local store they were probably taking between 15-20% of the aisle shelf space, were fully populated floor to ceiling, looked largely untouched and had a fairly wide spread of current, Rogue One and TFA offerings (at least the unloved ones). They were taking up more real estate then the actual Star Wars brick sets. They reminded me a lot of a similar (and similarly failing) product offering a few aisles over. The Star Wars Forces Of Destiny dolls. Fully populated display from day one. I don’t think my Target sold a single unit until they dropped past 50% clearance. Heck Chima and Bionacle Constraction stuff moved way better. Lego Batman has some similar warning signs. Yes the huge pool of product offerings was spread over 3 waves. But many of the wave 1 sets are still on shelves alongside wave 2 and 3. Further compounding things is just how little differentiation there is in the sets. The bulk are some sort of wheeled vehicle and some Batman figures. Almost no locations or playsets. It’s pure “Batman Wacky Races.” Which leads to the lines products not feeling well differentiated between themselves. Ninjago has generally been handled much better than those. The central part of the line will have 5-7 sets at the typical stepped price points from impulse buy up to flagship set. The sets rarely feel similar with a variety of vehicles, playsets, locations etc. and the parent or collector feels like he she can get the full wave. The ancillary impulse buy line with the spinner packs seems to clear the aisles reasonably well. (Although not as well as they used to. I suspect the flying airjitsu ones had a lot of parents saying “he’ll no” after household destruction inceidents.) The Lego Ninjago Movie sets were still a bit over produced, with a few too many that seemed to self compete resulting in some shelf backlog (looking at you Manta Ray Bomber). But the line still had enough truly distinct sets and those sold well in most cases. Even then many wave one sets still remain directly competing with Wave two. Not as bad as Batman, just because there largely was better price and subject differentiation between the sets. But you do see some weird things like Kai’s fire Mech sitting side by side on the shelf facing off against Garmadon’s Mecha man at the same price point. Which granted looks cool on the shelf, but is still not a great way to market or sell them.

It's worth noting, when you put the baby in the backpack on Cole's back, the knot on the back of his mask acts as a lock to keep the baby in place.

The one thing that benefits the main Ninjago line is they have so far remained restrained in how many sets they release per year/wave. The SOG and Season 9 releases both have the classic stepped price point releases of 5-7 main sets plus a few impulse items. That isn't the sort of thing that is clogging inventory and causing product backlog and reduced profit. Things like 42 different Lego Batman sets and 9000 Star Wars buildable action figures is.

Lego currently has two inter related problems. Overstock or Oversupply in the channel, reducing demand for new merchandise. And oversaturation of individual products on the shelf space. To put it simply they have too many offerings. And when you give consumers too many decision points, they walk away. That's why their classic formula of 5-7 sets at stepped price points per line worked well. A collector or a parent could reasonably be comfortable buying the entire theme that they enjoyed. No decision points. Lego Batman has 42 individual sets on shelves... It's actually even worse over in the pink aisles. Yeah Friends is a top seller, and Elves does decent. But notice the glut of Super Hero Girls? Too many different boxes staring down at the child leads to a tantrum, not a sale. Further it causes the backlog they are now experiencing as those sets viewed as "best" sell quickly and the aisles get clogged with unsold less attractive stuff, preventing restock. Those horrid Star Wars Buildable Action Figures are a great example of this. The merchants still have full cases of unsold Rey and Jyn Urso sets clogging shelves. Darth Vader and Stormtroopers sell. But others? Nobody ever asked for any of those Rogue One characters who's names the kids don't even remember 10 minutes after the movie. ("Ooo look! It's Stick Guy!") They grossly over produced waves of stuff tied to the three Lego movies. They would have been better served by tighter line control. They got away with it with TLM sets because many of those sets served double duty as classic City vehicles. Not so much Lego Batman. (I think Ninjago fared a little better with a slightly narrower product lineup). Once again the girl aisles hit the same problem. While sales their are fantastic they expanded into the aisle too fast and oversaturated the available offerings. Girls don't have the "Gotta Catch Em All" mentality of the boys. Fewer better full featured sets would be a better way to go there. Accross the staggered and stepped price point. Once again if your customers are having too much trouble deciding between which of your products to buy, they aren't buying any. And inventory backup occurs.

That's design side. With a Jan 1 2018 release date that puts its cycle at about 18 months. Which is probably about right for a standalone "non theme" D2C set. Remember Design is only part of the process. Unless they are designing new molds and tooling 7 months should be more than enough design time for a single set. I suspect that due to their very core nature the Modulars don't require quite as much design time and validation. They are the designers putting their AFOL hats on and MOC'ing. They don't have a lot of play features to validate. The basic footprint is pretty well predetermined, etc. Not a lot of moving parts.

That’s about right. The development cycle for something like a modular is 18-24 months. The cycle for things like an entire theme, or in particular a Licensed theme can extend out well beyond that from start to finish. Right now Lego knows what the next Modular is, and is probably close to a final design of it. Getting it ready to start the preparation for production. They likely also have determined what the subject of the next one after that will be at least tentatively, and are just starting the preliminary design process. Remember there are production and logistic cycles to these things. They have to produce the set. Schedule factory time. Refine not just the design, but the build and instructions. Get the art and packaging done, etc. ship the various parts and sets around the world to put it all together. 9-10 months for that is not unreasonable. They probably also have a pretty solid “to do” list for the modulars. Probably stretching out over 5-10 releases. Nothing concrete. Just subjects that they would like to cover or have discussed in their brainstorming and planning meetings. The list probably evolves every year.

There’s a reason for that. WARNING MAJOR SPOILER DO NOT CLICK IF YOU DO NOT WANT TO KNOW!

They are using what’s known as PLA. It’s the most commonly used plastic in the 3d printing community these days, having supplanted ABS due to ease of use and lack of plastic emissions when printing. It’s actually much harder than ABS. If anything it’s a bit brittle compared to traditional plastics. It will however soften and deform at relatively low temps compared to ABS. So leaving it in a hot car in summer may cause warping. It’s the same stuff they use for biodegradable picnic utensils. Like the knives and forks you get at Disney. If it is injection molded it is considered food safe.

A solid episode I liked it. Just not quite as much as the last two. re Harumi...

/sigh after arguing, screaming and throwing tantrums that “Castle must be returning! Now that Nexo Knights has ended!” You start doing the normal Castle fan “not good enough” lists. Castle can only return if “no stud shooters” and “no colorful easily identifiable main characters” only army builders allowed! “And we want only these wheels! Not those ones!” And “don’t you dare give us anything new or different! We want that 20 year old mold or nothing! Fun for kids be damned.,” uh huh... Do you start to see why maybe, just maybe Lego might not be paying an awful lot of attention to your wants and desires? I mean you are just crying out “give us Classic Castle, but with no play features and nothing that appeals to kids!” You do realize that this is generally not considered a formula for success by a toy company, Right?

I'm honestly not sure. Either way I think the Pirates ones were the first that got any widespread traction to the point they are still remembered today. Whereas the Spaceborn stuff is fairly obscure even among Lego fans.

A little bald dude in an orange robe with a broom, wearing one of those big nose glasses and mustache novelty masks?

We get a lot of exposure to Castles in a non historically accurate and more romanticized for. Which Lego fits fairly well. The best example I can think of is think of the European knowledge of view of the American Old West. Such as the now classic Spaghetti Westerns. Americans views of and liking of all things Castle and Medievel is kind of like that. And believe it or not Americais not without Castles of sorts. There are some authentic, such as The Cloisters, on the northernmost tip of Manhattan, shipped over brick by brick. Some are recreations, ranging from moderately accurate to Disney. And perhaps most often forgotten, America actually has some of the last of the true Castle style fortifications to be really built, back in the 18th Century. The Revolutionary Era Stone Fortresses. West Point, Ticonderoga, etc. No Palaces, but we have the walls and battlements.

Clearly they just replaced the Serf's with robots. Which could explain why the little Nexo Knight Slave robots always looked to be depressed and in hell. They just used Goblins as the season villain for Elves over in Minidoll land. We tend to forget, because it's colorful minidolls. But Elves is a Fantasy/Castle theme. That seems to be doing quite well on store shelves.

It looks nice from our narrow POV. But it was still a 1920’s gangster theme. Which unsurprisingly playtested poorly.

It's worth noting that Pirates was really the first theme or Lego line to have in the rudimentary pieces of a story backing it. There were those little storybooks (comics?) That gave names and struggles to the characters. That set Pirates apart a bit from Castle and Space, each of which had their own hooks.