Toy retailers could begin slashing prices this weekend in response to an announcement that cash-strapped Child World Inc. plans to aggressively cut prices.
Toy industry experts say it is too soon to gauge the depth or the impact of Child World's promotions. But area residents could begin to see discounts of between 10 percent and 50 percent among certain toy stores by the weekend, they said. Child World has stores in Cheektowaga and Clarence.
Child World, of Avon, Mass., will cut prices on about $100 million worth of merchandise in order to reduce inventory, generate traffic and build cash flow, a company spokesman said.
Meanwhile, Dennis H. Barron, chairman of the board of Child World Inc. resigned Thursday.
Barron said in a statement he was leaving the firm to pursue other interests.
Child World is an 82 percent owned subsidiary of CNC Holding Corp., the parent company of Cole National.
Child World this week reported a third-quarter loss of $14.4 million. However, sales, bolstered by heavy advertising and price cutting, increased 18 percent to $185.6 million over the same period a year ago.
Child World runs a distant second behind market leader Toys "R" Us Inc., of Paramus, N.J., which has 25 percent of the retail toy industry. Child World holds about 6 percent of the market, as do Wal-Mart Stores Inc. and Kmart Corp.
Toys "R" Us has three stores in the Buffalo area.
Child World had been hurt when California investor Roy Disney, through his Trefoil Capital Investments L.P., dropped plans to buy 82 percent of Child World after examining the company's financing and the industry in general, according to the Wall Street Journal.
Investment firms and stock analysts have downgraded the company's preferred stock and subordinated debt, making it difficult for it to borrow, the Journal said.
"It's a bit early to say what impact (the discounting) will have until we have a better handle on how large the discounts will be," said David Liebowitz, a toy analyst with American Securities in New York City.
"This could lead to a price war," he said. "It could be a matter of discounting special products through advertised circulars. We don't know what the format of the sale will be."
Local competitors will watch Child World closely.
"We will be promotionally aggressive," said Alan Fine, senior vice president of Kay-Bee Toy & Hobby Shop, "but we're not going to overreact." Kay-Bee has 10 stores in the Buffalo area and 330 in the state.
Kay-Bee bought Circus World toy stores for $85 million in August. But the acquisition has not left the chain too cash poor to cut its prices, Fine said.
Fine also withheld specifics about discounting, but said, "Any retailer that went 50 percent off at this time of year is making a very desperate move."
Industrywide, toy sales have been fair so far this year, according to the Toy Manufacturers of America Inc., a trade group.
The toy industry expects retail sales to increase by 3 percent to 5 percent over last year's total of $13.4 billion, said Ava Slepicoff, spokeswoman for the association. "Considering the times, I think it's good," she said.
But there have been no blockbuster toys to drive the market the way Cabbage Patch Kids and Nintendo moved buyers in the mid-1980s.
Nintendo, Barbie, Magic Nursery, Teenage Mutant Ninja Turtles and New Kids on the Block dolls are selling well, she said. The Simpsons licensed characters have not done as well as expected, perhaps because the television show changed time slots, industry observers said.