Vtech takes tariff, pandemic lessons but faces residual Trump risk — Panjiva
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Vtech takes tariff, pandemic lessons but faces residual Trump risk

China 2968 Earnings 724 Info Tech - Tech Hardware 793 Malaysia 142 Quote Watch 452 U.S. 5314

Vtech reported fiscal H1’21 (six months to Sept. 30) revenues which were unchanged compared to a year earlier, including a 5.6% year over year dip in revenues in North America. While retail sales were hurt by the pandemic, the electronics manufacturer stated that “sales turned out better than expected“. 

Panjiva’s data shows that U.S. seaborne imports linked to the firm, which are highly seasonal due to the predominance of electronic toys in the company’s product mix, had dropped by 23.9% year over year in Q3’20. There’s subsequently been a recovery with a 58.7% surge in October, perhaps indicating late stocking for the holiday season as well as rebuilding inventories in the toy segment. 

A similar pattern has been seen across the toy industry with total U.S. toy imports by all importers having increased by 8.2% in October after an 8.5% drop in Q3.

Vtech has struck an optimistic note, stating that “consumer demand has recovered strongly in some markets” with the firm’s U.S. revenues “benefiting from stay-at-home demand for electronic learning toys“. Nonetheless, the firm does not expect full year revenues to expand given a “resurgence in infection rates in the US and Europe could weaken consumer sentiment“.

Late catchup for Vtech

Chart shows U.S. seaborne imports linked to Vtech.    Source: Panjiva

The firm’s supply chain remains exposed to U.S.-China trade tensions. The firm faces 7.5% section 301 tariffs on its U.S. imports of domestic phones from China while its commercial electronics products are subject to 25%.

The core toy line does not currently have to pay additional duties. The firm has a marginal risk emerging during the remainder of the Trump administration, as outlined in Panjiva’s Nov. 9 research, should the Trump administration pursue a scorched-earth policy. In any event the incoming Biden administration has an avowedly hawkish stance with regards to China and may not remove the tariffs in the near future.

Vtech has dealt with the arrival of tariffs by shifting manufacturing to two factories at Penang and Muar in Malaysia. That’s only had a marginal impact on its import mix to the U.S. given the bulk of shipments are toys. The share of shipments from ports in China fell to 91.6% in October compared to 94.3% of the total in the past 12 months and 99.0% in 2018 before action against tariffs was taken.

Sourcing from outside China still minor

Chart segments U.S. seaborne imports linked to Vtech by origin.    Source: Panjiva

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