Wal-Mart chops toy prices extra early

World's largest retailer ignites holiday price war in October by announcing deep discounts on some holiday toys.

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By Parija B. Kavilanz, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- It's only the first day of October but Wal-Mart set the ball rolling on holiday price wars Monday by announcing deep discounts on some popular toys for the holiday shopping season.

Wal-Mart (Charts, Fortune 500), the world's largest retailer, said it cut prices between 10 to 50 percent beginning this week on a select number of toys.

"We're starting early and aggressively with unbeatable prices on the items we know are on [childrens'] lists," Wal-Mart's chief toy officer Laura Phillips, said in a statement.

The retailer said it will announce new discounts every week through the holiday shopping season.

But perhaps the move also indicates some nervousness on the part of retailers about the upcoming crucial holiday shopping months.

Typically, November and December account for as much as 50 percent of retailers' annual profits and sales.

The National Retail Federation (NRF) estimates that total holiday sales this year will grow 4 percent, weaker than last year's 4.6 percent increase, as many more Americans struggle with less discretionary income tied to a housing slowdown and credit market crunch.

These two economic headwinds hurt low-to-middle income shoppers in particular, who also happen to be core shoppers at discounters like Wal-Mart and Target (Charts, Fortune 500).

Another big concern this year for retailers like Wal-Mart, Target and Toys "R" Us, three of the biggest toy sellers, are the millions of Chinese-made toys that were recalled in recent months because of lead contamination and defective designs.

The fourth quarter also represents more than 80 percent of annual toy sales. So any slowdown in toy sales because of safety concern could be damaging for retailers and toy makers' holiday profits.

Among the new discounts, Wal-Mart said it is slashing prices on Tonka Trucks to $19.76 from $27.44, Kid Tough Digital Camera to $54.88 from $64.88, now $54.88, Fur Real Squawkers Parrot to $54.88 from $69.96 and the Are You Smarter Than a 5th Grader game to $12.88 from $18.96.

New "mystery" Elmo on list

Wal-Mart also announced its top 12 toys for Christmas, which include the Kid Tough Digital Camera and the Smart Cycle from Fisher Price, Air Hogs Havoc Heli and Aqua Dots Super Studio from Spin Master and the Power Tour Electric Guitar from Hasbro (Charts).

Also on the list is the new Elmo from Fisher Price, a division of Mattel (Charts, Fortune 500). Fisher-Price is expected to reveal this year's surprise Elmo doll on Nov. 8.

Fisher-Price's 10th anniversary Elmo called T.M.X. Elmo was one of the hottest toys last year.

Jim Silver, editor and co-publisher of Toy Wishes magazine said Wal-Mart could be making a mistake by slashing toy prices this early.

"When you cut prices that deep, Wal-Mart will probably get a good [sales] month in October but could be sold out of the hot toys by December," Silver said.

"That happened to Wal-Mart last year when its sales in December weren't that great," he said. Moreover, he said one of the items on Wal-Mart's Top 12 toys list - the Kid Tough Digital Camera - is actually a product from last year.

"I haven't seen this new Elmo. Frankly, I'm a little surprised that it's on their Top 12 list," he said.

Toy Wishes is expected to release its annual list of the "Hot Dozen" toys for the holidays on Tuesday. To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.