JEFFERIES: Amazon is going to dominate the toy industry this holiday season (AMZN)

September 29, 2017

JEFFERIES: Amazon is going to dominate the toy industry this holiday season (AMZN)

Amazon

Amazon already owns a large part of the toy industry, but with Toys R Us working through its bankruptcy, the online giant's footprint is about to get even bigger.

In 2016, toy sales on Amazon totaled $4 billion, which means the company controlled about 20% of the total market, according to Stephanie Wissink, an analyst at Jefferies.

"More than half of annual toy sales on Amazon are concentrated in less than 60 selling days and 35% are in December alone," Wissink said in a note to clients. "It's plausible that Holiday 2017 may mark the point of near-parity when bricks and clicks sales are equalized."

Wissink says Amazon sold about $2 billion of toys in the last two months of 2016, and that was with Toys R Us as a competitor. Now that the toy giant is hobbled, Amazon's share may grow even larger.

Toys R Us isn't completely out of the picture though. The company pulled in $4.66 billion of revenue in the fourth quarter of 2017, surpassing Amazon's yearly toy sales and more than doubling its fourth-quarter sales, according to data from Bloomberg. It should be noted, however, that revenue from Toys R Us includes every category of products, including baby items.

While revenue is still large at Toys R Us, its been declining every year since 2012, Bloomberg data shows. The company's bottom line is also lackluster, as Toys R Us has an adjusted net loss totaling $27.6 million in 2017, according to data Bloomberg.

toys r us revenue

Tech-savvy millennials are starting to have more kids, and Wissink said this new generation of parents are strapped for time and leaning more toward shopping online than in brick-and mortar-stores. As the holiday season fast approaches, it looks like Amazon could stand to benefit from this trend.

Shares of Amazon are up 27.82% this year.