Toy stores say they’re not seeing China backlash

But price competition is just part of the problem _ the toy industry needs to keep churning out big hits to compete with the array of electronic gadgets like cell phones and iPods.

Last fall, the industry was abuzz over TMX Elmo from Mattel's Fisher-Price brand; the more high-tech version of the popular fuzzy, red character became an instant hit with shoppers, drawing customers into the stores early in the season. At the moment, there isn't one must-have for this holiday season.

Still, retailers say they are encouraged by early strong sales of some of the holiday toys that just hit stores in recent weeks.

According to Jim Silver, editor of Toy Wishes magazine, which is set to reveal its predictions for the season's top dozen hot toys Tuesday, there are more toys this year that are connected to the Internet or to a TV monitor.

"Kids are becoming more high-tech, and manufacturers are really changing their offerings," he said.

According to retailers and analysts, toy sellers are enjoying strong sales of anything related to some of Hollywood's hot properties like Walt Disney Co.'s "High School Musical" and "Hannah Montana," and the summer hit "Transformers," released by Viacom Inc.'s Dreamworks and Paramount units.

Wal-Mart and Toys "R" Us reported strong early sales of Aqua Dots Super Studio, from Spin Master Ltd., an activity set that involves using colored beads. Toy experts said they are also bullish on toys that interact with the Internet like Zizzle LLC's Spotzmaker, which produces colorful buttons that interact with a Web site called Spotzgirl.com.

Other key items that are expected to do well are JAKKS-Pacific's Eye-Clops, an electronic magnifier that plugs into a TV, and Red Octane's "Guitar Hero III, Legends of Rock," the latest in a series of video games that allows consumers to hook up guitar peripheral to a game console like the Sony PlayStation, Microsoft Xbox or Nintendo Wii.

Toy merchants have been closely monitoring to see whether shoppers are boycotting specific brands hit hard by recalls, but so far it has been a mixed bag.

While Boire noted that Mattel, bruised by three high-profile lead paint recalls this summer, saw a sales slowdown at first, sales have bounced back. In particular, the toy line from the Disney-Pixar movie "Cars" has been extremely popular despite a recall of "Sarge" cars based on a character in the movie. In mid-August, Mattel announced a worldwide recall of 436,000 die cast "Sarge" cars because they contained excessive amounts of lead paint.

But sales of RC2 Inc.'s Thomas & Friends Wooden Railway sets have been mixed, according to Boire. The toy company announced its second recall of products from the train line in less than three months.

"Some are back and others are still struggling," Boire said. "The big brands are going to do well, but the marginal brands are suffering."

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