Back to Basics For US Toymakers
'WHEN it comes to toys" this Christmas season, "parents are going to turn to the tried and true for their children - the types of toys that the parents had when they were small children," says Bob Seligman, editor of Toy & Hobby World, a monthly trade publication. That means that this year's hot sellers will be the "most basic products - building blocks, erector sets, puzzles and games, and Barbie dolls," he says.What it also means, say toy industry experts, is that the major toy companies are going to be scrambling to boost sales in a retail climate that is lackluster at best and a downer at worst. The toy industry is talking about a 5 percent sales gain over last year, when sales reached slightly over $13 billion. That sum excludes electronic games, which mustered about $3 billion. But barring a sudden turnaround in consumer confidence and the economy, most experts predict that sales will be flat or only modest ly better this holiday season. More expensive electronic games, which were big sellers in recent years, are not expected to do as well. Still, toy experts say the industry will hold its own this Christmas - traditionally the biggest sales period for the industry. m fairly bullish," says Andrew Beja, a vice president with Advest Inc., an investment house. "The toy industry is proving to be somewhat recession-resistant. Even when times are tough, people find ways not to be a Grinch at Christmas," Mr. Beja says. Moreover, the industry has successfully downsized the past few years. Many independent companies fell by the wayside. The survivors have controlled domestic costs while boosting sales abroad, says Mark Manson, an analyst with Donaldson, Lufkin & Jenrette Inc. He too sees retail dollars flowing back to "conventional toys." Among toy companies expected to do well this Christmas: Hasbro, Mattel, Fisher Price, and Tyco. Mattel is best known for its Barbie doll; that line alone tends to garner between $650 million and $700 million annually. Last week, Mattel expanded its relationship with the Walt Disney Company to develop toys based on Disney characters. Tyco makes games, electronic items, dolls, small cars and other vehicles, as well as "activity" products such as Magna Doodle, Viewmaster, and Magic Copier. Hasbro has a broa d mix of products. Until this past summer Fisher Price was a subsidiary of Quaker Oats Company. But on June 28 Fisher Price was spun off as an independent company, focusing on preschool toys. Since then the stock, traded on the New York Stock Exchange, has gone from the $23 range to about $32. Beja particularly likes Tyco shares. The company has a new chief executive officer, has snapped up a substantial revolving credit line, and has a broad mix of products, including the Oopsy Daisy and Little Mermaid dolls - big sellers with young girls. Current global demographics are working in favor of the industry, says Beja. However, there is some evidence that the recession may have cut into birth-rates in the US, a giant market. But US toys are big sellers abroad, he says. Toys Us, the largest toy chain, with roughly 25 percent of the US market, has a strong presence in Europe and is seeking to open stores in Japan, the second-largest toy market in the world, next to the US. Ironically, Toys Us is facing tough new competition in the US from discount stores such as Wal-Mart Stores Inc. and K Mart Corporation. Though it lags behind Toys Us, Wal-Mart sells more toys in the US than the other main specialty toy stores, Child World and Children's Palace, both owned by CNC Holding Corporation, and Kay-Bee Toy & Hobby Shops Inc., a division of Melville Corporation. Toys Us is expected to open its first store in Japan next month, just in time for Christmas. Toys Us, based in Paramus, N.J., eventually hopes to have up to 100 stores in Japan, although the chain has been reportedly running into deep resistance from Japanese retailers. "Wherever Toys Us goes, toy sales go up," laughs Beja.