Will Santa Save The Toy Industry's Fourth Quarter?

With all retailers giving one last red-and-green push in the final days leading up to Christmas, the noises coming from the toy department are especially Hail Mary-esque.

Both Toys R Us and KB Toys are pushing their "Bill me later" features and money-off online shipping; KB Toys' home page is screaming: "HUGE clearance sale--up to 60% off." Department stores are sounding a little desperate, too: Sears is offering a "Buy one, get one 50% off" on all in-store toy sales, while JCPenney is offering discounts between 30% and 60% on its toys.

Part of the problem, observers say, is the lack of a "hot" toy. And if there was ever a year when stores could use a little Tickle Me Elmo or Cabbage Patch Kid magic, this is it. Massive consumer recalls have dominated the headlines, causing parents to fret over the safety of imported toys and shun some of the best-established brand names.

"There are several factors impacting the toy industry right now," says Anita Frazier, industry toy analyst for NPD Group, "including general economic malaise and "hot" competing categories (e.g., video games), as well as recall skittishness and the lack of any one particular hot toy."



But, she says, consumers are out there shopping--and they aren't about to deprive their kids of toys this year. "There might not be one item that is at the level that the TMX Elmo was last year." On a recent shopping trip, she found that "several styles of Webkinz had sold out," she says, as had Robosapiens, Roborapters, and even a Nerf Dart Tag Game.

But so far, it's still too early to say how toy sales will play out. While the recalls began in the summer, toy companies live and die by fourth-quarter numbers. "Year-to-date through October, the toy industry is actually flat versus a year ago," Frazier says, "so any of this hasn't yet shown up in the sales data."

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