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NO TOYING AROUND — RETAILERS HOLDING HOLIDAY PRICING POWERNew York,NY, December 14, 2006 — When Wal-Mart announced in October that it was rolling back prices on more than 100 toys, the industry braced for yet another holiday season of vicious price wars.
Instead, something remarkable has happened. Toy prices, which typically decline from August through December, appear to be falling at the slowest pace in three years, according to A.G. Edwards analyst Tim Condor, who tracks a similar basket of toys sold at Wal-Mart, Toys 'R' Us and Target.
Another analyst, Sean McGowan of Wedbush Morgan Securities, says: "Not only is the environment much less promotional this year compared with last year, but some prices are actually higher now than they were a few weeks ago — that's almost unheard of."
To be sure, toy prices are still extremely competitive, and the Big Three retailers, Wal-Mart, Toys 'R' Us and Target, in descending toy sales order, monitor their competitors very closely to ensure they are no more than a few pennies apart on all the hottest items of the girt-giving season.
But the $22 billion toy industry, which has seen sales shrink for the past five years, appears to be benefiting from an array of new products that go beyond simply the one or two hot toys that tend to dominate the holiday season.
"When you have one or two toys that everyone wants, then no one makes any money," McGowan said.
While T.M.X. Elmo and Nintendo's Wii grab the headlines, "retailers are quietly selling a lot of other products," he continued.
As evidence of this "bench strength," Toys 'R' Us is planning to unveil today a list of 10 toys that it considers "surprise hits" of the holiday season. These are the toys that have largely been under the radar, but have quietly emerged as best sellers, such as the Lincoln Log Big L Ranch from K'Nex ($29.99), the ATM Machine from YOUniverse Girl ($29.99) and the High School Musical DVD Board Game from Mattel ($24.99).
"This is turning out to be a strong toy season, and that is the result of a lot of great, innovative products out there," Kathleen Waugh, a Toys 'R' Us spokeswoman said.
Condor, of A.G. Edwards, estimates that prices for a basket of toys that he tracks are down 6 percent since Aug. 31, compared with a decline of 10.5 percent for the same period last year, and a 9.4 percent drop in 2004.
"Using a baseball analogy," Condor wrote in a recent research note, "major toy manufacturers are hitting several 'singles and doubles' (along with the grand slam of T.M.X. Elmo), while avoiding many products that 'strand runners in scoring positions.' "
Below are the top 10 Toys "R" Us surprise holiday hits:
Founded in 1992, K'NEX Industries was formally established to make and sell what has become one of the world's leading integrated construction systems for children. Winner of over 150 international awards and recognitions, K'NEX seeks to build young minds with its exciting product line and critically acclaimed K'NEX Education program.
Founded in 1992, K’NEX Brands, the world’s most innovative construction toy company, was established to make and sell what has become one of the world’s leading integrated construction systems for children. Winner of over 200 international awards and recognitions, K’NEX is America’s building toy company focused on Building Worlds Kids Love, and encourages youngsters to “imagine, build and play.” For more information, please visit www.knex.com.