Toy Industry Winds Up Ahead of Holiday Shopping Season

It may not even be time yet for Halloween trick or treating, but for the toy industry and other retailers the Christmas holiday shopping season is just around the corner and closing in fast.

Amazon AMZN, for instance, just revealed its list of this season's hottest holiday toys – while the folks at timetoplaymag.com, the toy and children's product reviewing web site, have unveiled their own Most Wanted toy chart of 2013.

The toy industry's economic impact is far from childish. Chris Byrne, timetoplay's content director, says “traditional toys” – that is, not video games – bring in around $21 billion in annual revenue, with video games responsible for about half that amount. And according to The Associated Press up to 40 percent of annual toy sales take place during the holiday season, so for retailers we're entering what can be a make-or-break part of the year.

The AP also says donsumer holiday spending is expected to remain cautious as the the country continues to struggle with economic recovery – with retail revenue for the last two months of the year projected to rise about 2.4 percent, compared to a three percent increase during the 2011-2012 holiday season.

“Overall I think people are looking at (toy) sales being down this year to the tune of about $700 million,” said Chris Byrne during an interview with Benzinga. “But that is largely due to it's not a big movie year.” He says the lack of a blockbuster movie with a strong toy and merchandise link – something like the “Transformers” series – will probably create the lion's portion of that expected shortfall.

That being said, some front-runners have already emerged for this year's best-selling holiday toys, including the Big Hugs Elmo doll from Hasbro (NASDAQ: HAS) , the Doc McStuffins Get Better Check Up Center from Just Play – based on a character from a Disney (NYSE: DIS) television show – and the Barbie Digital Makeover from Mattel (NASDAQ: MAT).

Bryne – who does not hold any toy industry stocks – says along with dolls like Barbie, skill and action games as well as arts and crafts products are expected to do well this holiday season. He says understanding the toy industry means looking at “the confluence of toys, entertainment and lifestyle.” And he recommends potential investors remember the toy industry is more globalized than ever, and that they consider at a company's entire portfolio rather than just one particular product.

“The toy industry pretty much stays remarkably stable,” he said, “growing one or two percent. It may be a little bit more this year, but it's a pretty flat industry. It just depends on who is getting a bigger or smaller piece of the pie in any given year.”