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Sector Snap: Toys should fare well over holidays

Holidays expected to boost toy makers as shoppers will spend on children, despite weak economy

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NEW YORK (AP) — The holiday season should give toy companies a boost, since shoppers tend to spend on children even in a weak economy, an analyst says.

The toy sector is traditionally considered to be one of the most resilient during economic uncertainty. Parents and others are more likely to pull back on spending on themselves rather than skip buying toys for children. Even during 2008, the worst year for toy sales recently because of the financial crisis, toy sales slipped only 5 percent, according to Scott Hamann of KeyBanc Capital Markets.

Retailers will use discounts or exclusive offerings to drive traffic, Hamann predicted in a client note Tuesday.

The analyst said he believes Mattel Inc. and LeapFrog Enterprises Inc. should fare best among toy companies. Mattel will get a boost from its core brands including Barbie, Hot Wheels, Fisher Price and Monster High, as well as drawing strength from Cars 2 and Thomas & Friends, he said.

Meanwhile, LeapFrog is benefiting from the successful launch of the LeapPad Explorer, an educational tablet made for children that retails for about $99.

Hamann said the LeapPad has appeared on many lists of hot toys, and it's already becoming difficult to find the product. He expects demand for LeapPad to outstrip supply, boding well for 2012.

The analyst increased LeapFrog's price target to $6 per share from $5 per share and kept a "Buy" rating. Hamann also kept "Buy" ratings for Mattel, Jakks Pacific Inc. and Hasbro Inc. and maintained their $35, $24 and $50 price targets, respectively.

LeapFrog stock dipped 8 cents to $4.90 in midday trading. Shares of Mattel added 30 cents to $28.06, while Jakks Pacific's stock rose 4 cents to $18.87. Shares of Hasbro declined 7 cents to $35.02. Broader markets were slightly lower, with the Dow Jones industrial average down 0.3 percent.

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