How toy companies are grappling with shipping delays this holiday

Even from the porch of his home in Malibu, toy executive Isaac Larian can’t escape this holiday season’s biggest business challenge. He can see a long line of container ships idle at the Port of Los Angeles, about 70 miles away.

Larian, CEO of MGA Entertainment, said the congested port has been a persistent view off the California coast since at least May. As he tries to relax and watch the sunset, it’s a constant reminder of the many toys that have yet to arrive.

The delay in unloading the ships could jeopardize whether parents can buy the toys in time to wrap up and tuck under the Christmas tree. If they miss the opportunity, toys could linger on shelves with clearance stickers deep into the winter.

“I can see an ocean full of containers,” he said. “Ship after ship after ship full of containers waiting to unload.”

He said the company, the maker of LOL Surprise, Rainbow High and Little Tikes, currently has enough inventory to meet around 65% of its outstanding orders. He said MGA Entertainment had anticipated 50% sales growth this year but now expects to grow by 18% to 20%. He did not share specific revenue numbers because the company is privately held.

Larian is just one of many toy manufacturers grappling with a massive bottleneck in the global transportation pipeline caused by the coronavirus pandemic and worsened by the blockage of the Suez Canal in March. Shipping containers that once cost $3,200 now sell for north of $20,000, Larian said. And even when containers are unloaded, there aren’t enough truckers to deliver those shipments.

Power outages in China, a resin shortage and higher labor costs have also strained the supply of goods and increased prices.

“It’s a really, really complex set of problems that has a chain effect, and I’m afraid that this will continue for a long time,” Larian said.

No company is immune. Larger ones do have more resources. Home Depot and Costco have gone so far as to contract dedicated container ships to expedite their orders. Larger companies also have the cash to place orders well in advance of when the items are needed. Hasbro and Mattel didn’t respond to a request for comment for this story, but executives have stressed the big toy companies are better equipped to handle these challenges.

At a Goldman Sachs conference in late September, Hasbro CEO Brian Goldner said his company is “using all kinds of tactics and techniques to ensure that we will have the product that we need.” That includes nearly doubling the number of ports it’s using in the U.S. and adding a number of new ports in Asia, he said.

Hasbro expects some toys will be delayed, arriving in the beginning of the fourth quarter instead of the end of the third, but toys will be on shelves in time for the peak shopping season, he said.

“We believe we’ll have all the…