Toy industry gets back in the game

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Last year marked the first time U.S. traditional toy sales rose in several years, albeit only slightly, according to NPD Group Inc., a research company based in Port Washington, N.Y. Traditional toy sales — excluding game consoles and related items — eked out a 0.34 percent rise to $22.3 billion compared to $22.2 billion in 2005, and $22.7 billion in 2004. Meanwhile, the average ticket price for toys rose 5 percent in 2006 to $7.52, compared to $7.17 in 2005 and $6.97 in 2004, according to NPD, whose figures are based on a consumer survey.

Wedbush Morgan Securities analyst Sean McGowan and other toy analysts believe that NPD’s figures understate the improvement. They cite that Toys “R” Us Inc., which is under new ownership and management, had its best holiday season in several years. Privately-held KB Toys, which emerged from bankruptcy in 2005, is also showing signs of improvement.

Business at the nation’s top two toy makers is also strengthening. Mattel Inc. posted a 3 percent profit gain for the fourth quarter, boosted by a turnaround of its iconic Barbie line and strong sales of Fisher-Price toys, including the popular T.M.X. Elmo doll, one of the hottest sellers for the holiday 2006 season. Barbie sales increased 3 percent in the United States, the fourth consecutive quarter of domestic growth. Mattel is unveiling Chat Divas at the fair, Barbie dolls that move and lip sync to music hooked up to Apple Inc.’s iPod digital music player and can also chat on the phone.

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Hasbro is expected to announce solid fourth-quarter results Friday.

“Two thousand six was the first year that I think there was definitely a lot of creativity and a lot less reliance on retro, classic toys,” said Gerrick Johnson, a toy analyst at BMO Capital Markets.

Microchips have come down in price, enabling toy companies to make more advanced toys that are still affordable. Zizzle’s Shiffman noted one of last year’s toys — Lucky, a $39.99 interactive dog that obeyed 15 different commands — would have sold for $150 five years ago.

At least 50 percent of the toys that will be sold in stores this year will have some sort of microchip in them, according to Jim Silver, editor-in-chief of Toy Wishes, a trade publication.

But toy analysts say shoppers are still discerning. Playmates Toys Inc., which had a surprise hit with its $100 Amazing Amanda doll in 2005, failed to replicate its success last holiday season with Amazing Allysen because the interactive dolls were too similar, according to Silver.

And the threat of new hot gadgets is not going to go away. The toy industry has to keep coming out with innovative items, said Mattel president Neil Friedman.

“When we have great toys, the consumer comes back to the toy department,” he said. “Can the toy industry and other industries co-exist? Absolutely. Consumers will buy what the child wants.”

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