"I think you're looking at toy sales to be flat at best or down a few points," said Harris Nesbitt analyst Sean McGowan. "Sales in the first half of the year were already down and that's before we had gas at $3 a gallon."
The slump in year-to-date sales is troubling because of the strong toy lines that came out in conjunction with some hit films during the spring and summer. "You had toy lines based on 'Star Wars' and 'The Fantastic 4' and sales were still down," said McGowan.
The prospect of another tepid holiday season is especially vexing this year because of what many agree is a strong lineup of new toys that include the Leapfrog L-Max Learning System, the Magna-world Magnacity building set from RoseArt and new robotic Tigger and Elmo plush dolls from Fisher-Price.
"It's one of the best lineups I've ever seen and all the stars are aligned for the toy industry to rebound," said Dave Riley, an analyst with The NPD Group. "But the problem is probably going to be the price of fuel. It's just that simple."
Consumers already saddled with high gas prices will soon be hit with another shock when they get their first heating bills, which are expected to spike this winter as price hikes on heating oil and natural gas hit home.
With that in mind, low prices will probably be more attractive than usual this fall and retailers are expected to provide them. Wal-Mart has acknowledged that it will be more promotional than it was last year on toy sales and other mass merchants are likely to follow suit.
Toys "R" Us officials say they're going to set their prices as low as possible but won't go overboard on promotions during the holidays. Analysts say that Toys "R" Us was more ambitious in cutting prices during the 2004 holiday season than Wal-Mart and Target.
"We're in the toy business 365 days a year and we're all about finding the perfect toy instead of saving 50 cents on a toy," said Toys "R" Us spokesperson Kelly Cullen. "That's not to say saving 50 cents isn't important but we're more about giving people the greatest variety of product at good prices."
While holiday toy sales don't look promising, there are some signs of hope. Riley says that cash-strapped shoppers may pass on high-ticket electronic gadgets this year and focus on lower-priced traditional toys. "You could see people buying more action figures and plug-and-play games instead of spending $100 on one toy," said Riley. "So there's a chance that the economy could help traditional toys make a comeback." |
