Toy makers not playing around in downturn

NEW YORK - There will be fewer $250 dinosaurs and $180 robotic dogs on offer during the next holiday season as toy makers rein in production and trim prices in response to the weakest holiday season in decades.

The selection at the industry's annual trade expo American International Toy Fair, which officially starts Sunday, will include Elmo Tickle Hands from Mattel Inc., for instance. They're vibrating, furry red gloves that will stand in place of yet another iteration of the Tickle Me Elmo doll — and cost less too.

Jakks-Pacific Inc. will offer an improved version of its EyeClops Night Vision goggles for $60, $20 less than last year. And Zizzle LLC is reintroducing the P.J. Sparkles doll for $19.99, the same price it sold for in the 1980s.

The emphasis on lower prices across the industry comes as earnings reports this week and last from Mattel and Hasbro Inc. revealed that toy sales, particularly on higher-priced items, were sluggish during the 2008 holiday shopping season — and not, apparently, as recession-resistant as forecast.

While toy makers are still facing high costs for commodities such as resin and overseas labor — and both Hasbro and Mattel raised prices this year to offset those cost increases — commodity prices are expected to ease in the third and fourth quarters this year.

Less clear is whether consumer spending will pick up again.

"The No. 1 issue for the year is the economy, and frankly nobody can predict that," said Jim Silver, a toy analyst with timetoplaymag.com.

There will still be toys with a "wow" factor — such as Mattel's Mind Flex game that measures a player's brain waves to move a ball — but that will cost about $80, not hundreds of dollars.

"The $200 barrier is a very difficult barrier to cross, because you put yourself at the same price point as a video game system," said Silver. "Even in most years it's tough to compete with video games. I don't think you'll see many toys over $150 in the near term."

And some prices well below that marker will tumble: Elmo Tickle Hands will retail for $29.99, while 2008's Elmo Live retailed for about $60.

El Segundo, Calif.-based Mattel said last week it would cut expenses, trim its ad budget and stop making some underperforming lines of products. The news came after the nation's largest toy maker said its fourth-quarter profit fell by nearly half on weak sales of core brands such as Barbie and Hot Wheels.

"The biggest challenge we have this year is certainly the economy and how the consumers are going to deal with what little spendable income they have," said Neil Friedman, president of the Mattel Brands division at Mattel. "I would say we have certainly as many toys under $20 and probably have less toys over $100."

Hasbro, meanwhile, on Monday announced measures to reduce production, after the company said markdowns on slower-moving products were part of the reason its fourth-quarter profit fell 30 percent. It marked down higher-priced products, including its robotic dinosaur Kota the Dinosaur, which went from $249 to $99.

To temporarily lower production, Hasbro offered an extended Christmas break at factories in Waterford, Ireland, and East Longmeadow, Mass. The company also shortened the workweek at its Ireland factory and held off bringing some employees back to work in East Longmeadow. The company is also slowing some purchases from Asia.

This year, the Pawtucket, R.I.-based company also is focusing on less expensive toys. Last year, besides Kota the dinosaur, Hasbro promoted its Furreal Friends Biscuit My Lovin' Pup, an animatronic golden retriever, which retailed for about $180. This year, it will feature Lulu, My Cuddlin' Kitty, a lifelike cat that will sell for about $55.

"Shorter term, we probably will not have products like Kota on the market," said Chief Executive Brian Goldner.

Smaller toy makers are scaling back as well, particularly in terms of price.

In addition to the new version of its night vision goggles, Jakks-Pacific will also offer a mini EyeClops Bionic Eye for $39.99. It is also making lower-priced versions of its toys to sell at discount stores, such as a $19.99 version of its Girl Gourmet Cupcake maker, which retails for about $30 in its full-scale version.

At Zizzle, which focuses on products below $25, the P.J. Sparkles doll is part of a line of products that start at $5.99.

"Like everyone else, we're watching dollars and investment," Zizzle spokesman Scott Goldberg said.

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