Right early picks crucial to toy sellers' holidays

It's getting crowded in the race to succeed Zhu Zhu Pets as the next hot holiday toy.

From plush dolls that harmonize to tiny people and animals stored in bubbles in toy vending machines, collectibility and cuteness are off the charts for this year's toys.

But with so many toys vying to win "Most Adorable," it remains to be seen if any will duplicate the runaway success of the Zhu Zhu Pets, toy hamsters that squeak, zoom around on wheels and sell for just $10.

For toy sellers, making the right picks early is crucial so they have the right mixture of toys at the right prices to lure gift givers to buy. The right bet can mean the difference between being in stock or out of the year's must-have playthings in a season that can account for the bulk of a toy retailer's annual profit.

Toys R Us, which came out with its "hot toy" list Tuesday, is betting on a few contenders for the cute crown. Those include Blip Toys' Squinkies, tiny figures that fit inside a toy dispensing machine and come in 16 packs for $10; Mattel Inc.'s $12.99 Sing-a-ma-jigs, colorful plush dolls that harmonize; and $19.99 Pillow Pets, stuffed animals that convert into pillows.

While toys are relatively recession-proof - because parents cut back on themselves before their children - they are still affected by a down economy.

The Port Washington-based NPD Group, which does market research, said toy revenue was flat because of discounts during last year's holiday quarter, but the industry sold 4 percent more toys. For the year, revenue edged down 1 percent to $21.47 billion.

BMO Capital Markets analyst Gerrick Johnson expects that to reverse this year with a 2 percent gain for the year.

For the most part, toy prices will remain low, Needham & Co. analyst Sean McGowan said, because toys new this season were likely developed during the recession.

While it is too early to tell if there will be a true breakout this holiday season, analysts are taking note that Zoobles, creatures that pop open from a ball magnetically, are cute cheap collectibles ($5.99) that have been scarce on store shelves. - AP