Gotta, gotta get it
Strong holiday shopping expected

By Anne D’Innocenzio

Published: October 4, 2006

NEW YORK — A warning to procrastinators: Better shop early if you want the must-have holiday gifts.

Already, toy sellers such as Wal-Mart Stores Inc., Toys R Us Inc. and KB Toys Inc., are scrambling to get their hands on more hot toys, particularly T.M.X. Elmo from Mattel Inc.'s Fisher-Price, whose better-than-expected sales are making it increasingly likely to be the must-have toy for the season.

In yet another encouraging sign of consumers' willingness to spend, Scott McCall, chief toy officer at Wal-Mart, said high-priced toys like $249 red Mustangs under Mattel's Powerwheels brand are selling fast early in the season, something that he hasn't seen in five years.

And Michael Gould, chairman and CEO of Federated Department Store Inc.'s Bloomingdale's, reported strong sales of fall merchandise in September.

"There is no question that business is better. It has been a strong September," Gould said. "Apparel business has been good, the shoe business has been outstanding. There is a better feel out there."

Such encouraging signs are helping to lift the spirits of many retailers, who only this summer planned for modest gains in holiday inventory as they worried about how soaring gasoline prices and rising interest rates would curtail gift-buying.

Still, merchants are being cautious as they adjust some holiday orders, so consumers won't see the same level of generous deals as they did a year .

"Yes, (stores) may be adjusting to possible gains," said Dan Butler, vice president of retail operations at the National Retail Federation. "But they are not going overboard. Gas prices could always go back up."

Meanwhile, the New York-based Conference Board reported last week a rebound in consumer confidence in September, but the survey showed consumers' lingering concerns about the job market.

Consumers have remained resilient throughout the year, despite rising gasoline prices. Still, there have been some signs of consumer strain in recent store sales reports. Wal-Mart has blamed rising prices at the pump for slowing sales this year. J.C. Penney Co. Inc., which generally pleases Wall Street, reported disappointing sales in August, dragged down by slower demand for big purchases such as furniture.

For the holiday season, The National Retail Federation forecasts a healthy 5 percent gain in total sales for the November-December period.

Amid some lingering uncertainty, one challenge for stores is to keep profits high without jeopardizing sales. Selling out of products is good for profits, but stores' goal is to sell out of goods close to Christmas Day, not earlier, which would hurt revenues, said Madison Riley, a strategist at Kurt Salmon Associates, a consulting firm. He estimates that holiday inventories are up anywhere from 3 percent to 5 percent.

Another issue is that no hot apparel items have emerged, according to Wendy Liebmann, president of WSL Strategic Retail, a New York-based consulting firm.

But the toy business is a different matter — children don't want a substitute for a hot toy. That's why toy sellers are scrambling to get their hands on T.M.X. Elmo and other hot items that are beating sales projections.

Jim Silver, editor-in-chief of Toy Wishes, a trade publication, estimates that Fisher-Price made about 700,000 T.M.X. Elmo units, and the company is scrambling to make more. Fisher-Price officials declined to comment. Another hot item that analysts expect to be in limited supply this holiday season is Sony Corp.'s new generation console PlayStation3 when it hits stores Nov. 17.