Transcripts

The Toy Game Gets Ready For A Rebound

SUZANNE PRATT: In New York this week, it's all about fun at the international toy fair. The toy industry is coming off a rough year, with toy recalls and U.S. sales falling 2 percent to about $22 billion in 2007. But as Scott Gurvey reports, hope springs eternal when new toys are in view and this week's extravaganza is no exception.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: For the toy industry, 2007 was a tale of two worlds - weak sales, especially in the fourth quarter in the United States, offset by much better than expected results from overseas. Hasbro CEO Alfred Verrecchia predicts strong worldwide demand this year for Hasbro's transformers, Nerf, and Fur Real Friends lines and he notes that toy sales hold up fairly well in difficult economic times.

ALFRED VERRECCHIA, CEO, HASBRO: When people cut back, they're generally cutting back perhaps on vacations or things of that nature. They try to do well for the children and because we are a relatively low-priced product line, people can go out and continue to buy toys.

GURVEY: Industry leader Mattel is coming back from a 3 percent sales decline last year, after recalling millions of toys due to safety issues. This year, 80 percent of Mattel's toys have a computer or electronic element. For the 40th anniversary of hot wheels, there is a model which connects to the Internet. Barbie owners can be real fashion designers with computer software. There is even an electronic element to the classic Tickle-Me Elmo, and D-Rex (ph), the latest in dinosaurs. Mattel President Neil Friedman says his company anticipates increased costs this year, but is prepared.

NEIL FRIEDMAN, PRESIDENT, MATTEL: Commodities are going up. Lbor is going up, you know, all the things, transportation -- all the things that we know about are going up, so there will be some increases in toy prices. However, 80 percent of our toys still are under $30 and Matchbox and hot wheels cars are still $0.99, so there's always something for the consumer to buy that's popularly priced.

GRUVEY: Toys analyst Sean McGowan of BMO Capital Markets is bullish on Mattel. He says the company's stock was over-punished" last year.

SEAN MCGOWAN, TOYS & SPORTING GOODS ANALYST, BMO CAPITAL MARKETS: If you "X" out the fact of the recalls, they actually had a better than expected year. So I think 2008, with the benefit of these entertainment properties that they have will be a very good year and the stock will do very well. Hasbro, I think, longer term, could work out pretty well, but the early part of this year will be challenged by difficult comparisons, so we're currently rating that a "hold."

GURVEY: The toy industry's own association and the Consumer Product Safety Commission are both taking steps to increase the amount of testing done to ensure safer toys. About 80 percent of the toys sold in America are made in China. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.