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By Andria Cheng
NEW YORK--With economic uncertainty and the U.S. presidential election foreshadowing the upcoming holiday season, toy companies are hoping playthings that work with popular mobile devices and apps can help them attract shoppers.
Mattel Inc. (MAT) is introducing a Fisher-Price plush monkey that will work with an iPhone to allow infants six months and older to engage in interactive play. Some of the company's Hot Wheels cars and Monster High dolls also come embedded with sensors used with games that consumers can play on their iPads.
Also making a comeback is Hasbro Inc.'s (HAS) Furby, the electronic pet first created in 1998 that turned into a hit at the time. After a disappointing attempt to remake the toy a few years ago, the new Furby, $59.99 versus the original one at $35, comes with an LCD screen and allows its owner to feed it virtual sandwiches and other foods from an iPad. Hasbro also is introducing popular apps such as Fruit Ninja to board-game formats.
"Technology always changes the toy business," said Jim Silver, editor in chief of toy-review site TimetoPlayMag.com, which on Friday unveiled its holiday 2012 most-wanted toy list. The event gathered major toy makers, from Mattel and Hasbro to Jakks Pacific Inc. (JAKK) and LeapFrog Enterprises Inc. (LF).
The holiday season isn't only a make-or-break period for toy makers. They are also a crucial category for retailers such as Wal-Mart Stores Inc. (WMT), Toys "R" Us Inc. and Target Corp. (TGT).
Chains such as Wal-Mart often use toys as so-called loss leaders to lure consumers into their doors to buy other things, analysts said.
To differentiate its products, Toys "R" Us for the first time joined the tablet war, introducing the Tabeo device, which puts the company in direct competition with its own suppliers such as LeapPad maker LeapFrog. In another bid to drive traffic to its stores, the retailer also will allow shoppers to make a reservation on 50 hot toys in person.
The company, as well as Wal-Mart and Sears Holdings Corp.'s (SHLD) Kmart, also have either lowered or waived their own layaway fees to get consumers to think about shopping early.
As a result of the heavy push on layaway, Mr. Silver said some popular toys may run out of stock early this holiday season.
Even though different retailers and industry groups have published their own hot holiday toy list to generate buzz, things remain tough for the sector. Industrywide toy sales last year dropped 2% to $21.23 billion, according to NPD Group. Gerrick Johnson, an analyst at BMO Capital Markets, forecast the industry will see another decline of about 2% this year.
"There aren't a lot of innovative toys out there," Mr. Johnson told MarketWatch. "I'm not a big fan of the whole genre of the app toy. A lot of companies are making them, but they are kind of forced. Many are trying to create a toy that works with iPhone or iPad with real play being an afterthought. Only a few will succeed."
On the other hand, he likes the ideas of turning app games such as Angry Birds into physical toys.
Among some of the expected hot toys this year, entertainment-driven items are key. For instance, toys tied to Walt Disney Co.'s (DIS) Doc McStuffins, a television show about a girl who treats stuffed animals and toys, or the relaunch of Teenage Mutant Ninja Turtles at Nickelodeon show some promising signs, Mr. Silver said.
Mattel's Monster High dolls, which the toy maker first created in 2010 through a Web series, are expected to see merchandise sales more than triple to $300 million to $400 million this year from $100 million last year, Mr. Silver said.
"It's a big entertainment year," he said.
Also new for this holiday season, Barbie is getting into construction toys for the first time through Mattel's licensing deal with Mega Brands (MBLKF, MB.T). Meanwhile, Lego itself is heavily expanding its building sets for girls. Sales to girls rose to 30% of the private company's total in the U.S. from 10% before its introduction of Lego Friends girls' line in January, a spokeswoman said.
There are also a flurry of dolls for girls at different ages. Jakks Pacific has the Winx Club dolls that are tied to Nick's animated series of girls with fairy power. Toronto-based Spin Master unveiled La Dee Da dolls about girls attending a fashion school in New York. Barbie, meanwhile, for the first time also works as a digital camera, with pictures taken appearing on her T-shirt.
There may be a good reason for those introductions.
While most other toy categories, including action figures, games and puzzles and plush toys, saw a decline in sales last year, building sets last year saw sales surge 23% while dolls grew 7%, NPD's data showed.
Write to Andria Cheng at firstname.lastname@example.org
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