If history is any guide, look no further than Christmas 1990, when the economy was mired in recession and war was in the air. Toys `R' Us, the kid kingpin, saw sales for stores open at least a year slump 6.9% in the quarter ended Feb. 2, 1991, which included the beginning of the Persian Gulf War.
Fast forward: Toys `R' Us last week issued a third-quarter earnings warning and said it had to scrap some advertising and promotions and reshoot commercials due to the events of Sept. 11 and the economy. The chain insisted it is "well-positioned for a successful season" though "the economic environment remains a challenge." (See related story, P. 45.)
War and economic woes aside, marketers bet that by Thanksgiving, at least, kids and adults alike will crave an unalloyed flight into fantasy. The escape from reality will be driven, in part, by three major theatrical releases this quarter- the highly anticipated AOL Time Warner-owned Warner Bros.' "Harry Potter and the Sorcerer's Stone" (Nov. 16), Walt Disney Co. and Pixar's "Monsters, Inc." (Nov. 2), and AOL Time Warner-owned New Line Cinema's "Lord of the Rings: Fellowship of the Rings" (Dec. 19). So will the films drive sales of the toys, books and other merchandise based on them?
The runaway success of the Potter books has given related licensed merchandise a lift. According to an NPD Intelect survey, 4% of consumers said they purchased licensed Potter back-to-school items in May; the number increased to 11% in July. In May, only 2% of those surveyed bought Potter action figures, while 13% did in July.
"There is a lot of product coming out over the next month. What we know for sure right now is that the awareness of the movie has been going up steadily," said Christina Charasse, senior account manager, NPD Intelect's NPD Toys. The movie "has a family appeal, which bodes well for the toy market."
Mattel Co. is the master toy licensee for Harry Potter and will market a variety of toys, most notably, wizard action figures, each with a collectible casting stone; a levitating challenge game; and a potions toy that enables kids to brew drinkable treats.
Hollywood insiders and analysts believe box-office receipts for the Harry Potter movie may rival those of the $600.7 million U.S. box-office revenue record set by the 1997 film "Titanic." But that doesn't necessarily mean a slam-dunk for Potter licensees. "It is by no means a walk in the park," said Martin Brochstein, executive editor of The Licensing Letter. "Some of the biggest-box-office movies failed to work for licensees." He cites "Independence Day" and "Titanic" as examples.
Potter's film success will hinge on the movie's true target. Up until now, the books roughly target kids ages 9 to 14. Typically, movies for this target don't translate into huge product sales. "The book is probably a little older than the sweet spot of the toy market," Mr. Brochstein said.
Given Potter's power, Hasbro, the licensee for Disney's "Monsters, Inc." would seem to have its work cut out for it. "The movie follows a classic Disney formula-you have the lovable central character and his sidekick," Mr. Brochstein said. "It's a family film. Is there room for each on the shelves? Absolutely."
The ramp-up to Disney's "Monsters, Inc." began this summer and has been relentless. Speaking at a recent Goldman, Sachs & Co. conference, Robert Iger, Disney's president-chief operating officer, called it "the next great franchise." Even while visits to Disney theme parks are down, preorders from key toy retailers selling "Monsters, Inc." merchandise are strong, he noted.
The public's need for escape into a world where good trumps evil and enemies are slayed both by sharp wits and arms is likely to bode well for the movie releases and the toys based on them. The Sept. 11 attacks are expected to help spike sales of traditional toys, old standbys like Lego building sets and Hasbro's G.I. Joe.
Mattel's line of Matchbox rescue vehicles is expected to hit big. However, the company pulled its MX99 Helijets, toys based on the TV series "Max Steel," because of a story-line about an attack on New York City highlighted on product packaging. Post-Sept. 11, "We reviewed all our product lines to ensure that we were being sensitive," said Sara Rosales, a Mattel spokeswoman.
Among the major mass-market retailers, Kmart Corp. said interactive and electronic learning toys such as Leap Frog Enterprises' LeapPad and Imagination Desk will be hot this year. Retailers also see a comeback for some old favorites- Poo-Chi from Hasbro's Tiger Electronics and Tickle-Me-Elmo, which launches an anniversary edition with five new tickle points. For girls, there is less bellicosity and more Barbie. Mattel's "What's her face" doll comes in four styles-glam, cool, sweet and hip.
Contributing: Mercedes M. Cardona, Alice Z. Cuneo and Jean Halliday