Specialty toy sellers tout quality over discounts

NEW YORK (Reuters) - As discounters like Wal-Mart Stores Inc put up a fierce fight for their share of holiday toy sales this year, the CEOs of specialty retailers FAO Schwarz and Toys "R" Us are touting quality to lure shoppers.

This year's holiday shopping season is more crucial for retailers than in the past -- the prospect of a deep recession, job losses and credit tightening has led U.S. consumers to clamp down on spending. Experts think this holiday season could be the worst since the early 1990s.

"In times of economic stress, good brands focus on what it is they are all about," said Edward Schmults, Chief Executive of FAO Schwarz. "I can't start bringing in toys that are discounted at Wal-Mart or Toys "R" Us. That would be a disaster."

Among the top-selling items on Friday at FAO Schwarz were the $130 Muppet WhatNot Workshop, which allows kids to build their own muppets, and items like scooters for upwards of $80.

Even if the contracting economy forces parents to wave goodbye to Christmas presents for themselves, they will not disappoint their kids, Schmults said.

"When you enter recession ... the last thing parents (continue to) spend money on is their kids and the first thing they start to spend money on again is their kids," he said shortly after the company's Manhattan store opened on Black Friday, which marks the start of the holiday shopping season.

Some bargain-hungry consumers have turned to discounters for much of their purchases. Wal-Mart, for example, began cutting toy prices in early October to entice shoppers.

But "quality is important in toys," said Toys "R" Us CEO Jerry Storch said. "Even the expensive toys are not so expensive in the grander scheme of things," he said, citing Hasbro's nearly $190 toy pup Biscuit, and Mattel's Elmo Live for $60.

Toys "R" Us and Wal-Mart sell several of the same brands, while Schmults said FAO's products overlap less than 10 percent with Toys "R" Us and even less with Wal-Mart.

TOYS "R" US DEALS

Hard-core shoppers typically line up in the wee hours of the day on Black Friday, even as early as midnight, at stores like Wal-Mart and Best Buy Co to snag the best deals.

Outside the Toys "R" Store in Times Square, for example, shoppers gathered as early as 9 p.m. ET the day before and a line stretched down the street before 5 a.m. ET on Friday, Storch said.

The holiday season is crucial for toy sellers, who derive a large portion of their annual sales in the period.

But only 41.6 percent of consumers plan to buy toys this year during holiday shopping, while 48.3 percent had toys on their list two years ago, according to a National Retail Federation survey.

That's also down from the 43.1 percent last year, when toy retailers faced a massive recall, spooking parents as they headed into the holiday season. But the economy has overshadowed product safety concerns this year.

Still, toy retailers expect to fare better than other sectors.

"Parents are cutting back on luxuries for themselves ... large automobiles or buying a new house or a big vacation," and not scrimping on toys, Storch said.

Though discounters seem to be the top choice for many cash-strapped consumers, some still swear by specialty stores.

"We come here every year," said Solomon Leggett, 30, of Atlanta, who was shopping at the FAO Schwarz store in Manhattan on Thanksgiving Day.

"It is a different selection, more unique ... things you can't go to a Wal-Mart or Target and get."

(Reporting by Aarthi Sivaraman)