In the 1960’s there was a song on the radios sung by the Byrds called Turn! Turn! Turn! and its lyrics had the phrase To everything, turn, turn, turn There is a season, turn, turn, turn And a time to every purpose, under heaven. If you drop the turn. To everything there is a season.

That phrase is very purposeful for the world in general. Typically, there is more rain in the springtime which is good time to plant things. In the summer it is warmer, and hopefully the seeds became crops. When they grow, it will be time to harvest in the fall and when it is cold to let the land fallow or do something else. The phrase to everything there is a season is very important for the retail world.

The retail world depends on supply chains. How does something get on the shelf? It means to work backwards, hopefully using AI to help plan. The idea is what were the sales last year and how long does it take when a shopkeeper orders the goods to when it arrives from whoever manufacturers it. In the retail world there are seasons, people rarely buy winter coats in the summer, they buy shorts and t shirts. That means the supply system tends to work 3 to 6 months in advance. If you know anyone in the advertising business, they are working on Christmas campaigns in the summer and Summer campaigns in the wintertime. It is always possible to short time lines, but it is generally they way it works.

In an article by Daisuke Wakabayashi of the New York Times News Service, President Trump imposed tariffs across the board to countries around the world. As President, technically under the certain conditions he can do that, unless someone sues to determine the national crisis is not a national crisis and wins. Then the President has to work with Congress to approve the policy. In the meantime, it is what the law is.

Tariffs mean the importer pays a higher price. Whether the importer decreases their margins or passes it on the customer is debatable, but generally it means higher prices to the consumer. Partly because the companies which are the alternatives tend to raise prices, because the public accepts higher prices will be a result of the policies.

Factories in China produce nearly 80% of all the toys and 90% of the Christmas goods sold in the US. The production of toys, Christmas trees and decorations usually ramps up in the springtime. It takes about 4 to 5 months to manufacture, package and ship products to the US. Then they have to be distributed to the stores across the country.

President Trump imposed a 145% tariff or doubling of all prices. No retailer is going to eat the tariffs, they will pass on higher prices. How much will people buy is the issue?

Greg Ahearn, CEO of the Toy Association of US representing 850 toy manufacturers said if the production does not start very soon, there is a high probability of shortages by Christmas. Largely to logistics.

One of the primary reasons the toys are made in China is because Chinese manufacturing is unmatched in its production and capability. Toy makers change large portions of the product line every year to adapt to changing preferences of children. From materials to machinery, China’s factories are one stop-shops for importers. (the designers are typically in the US).

Kara Dyer, founder of Storytime Toys, a maker of children’s books with playset numbers, usually places an order in April to have inventory by mid-July. The Christmas holidays account for 2/3’s of her revenue. Kara placed a small order of $30,000, under a 145% tariff, the tariffs will be $45,000. The price of toys has automatically gone up 20%.

In a Toy Association survey of 410 toy manufacturers with an annual sales of less than $100 million, more than 60% had cancelled orders. If the tariffs remain, 50% expect to go out of business.

Some companies have rerouted their inventory to Mexico or Canada in the hope the tariffs will be lowered. This is a partial solution as manufacturers have to start paying fees for storage and the longer the item stays in storage the bill becomes due, with no sales. When the item comes in the US, the tariff is on the originating country.

Linking to dividend paying stocks, often times somewhere in the music you listen is the story. Although you have to do plenty of backstory to fill in the gaps. With all goods, there are logistics involved and understanding how the logistics works helps you be a better investor as you decide to hold or find alternatives.

There are more questions than answers, till the next time – to raising questions.