NEW YORK Feb 15 (Reuters) - An electronic Rubik's Cube and an action figure modeled after President Barack Obama were among the crowd-pleasers on display on Sunday at the annual Toy Fair, where manufacturers said they had their fingers crossed for better fortunes in the new year.
The trade show, one of the largest toy industry events held each year in New York, drew hundreds of manufacturers and retail representatives on the first day of the four-day event.
From No. 1 U.S. toymaker Mattel Inc MAT.N, to smaller players such as MEGA Brands MB.TO and Techno Source, toy makers displayed their products for 2009 under bright lights and elaborate setups at the Jacob Javits Convention Center.
The Toy Fair comes less than two months after the tumultuous holiday sales season in 2008, which turned into one of the worst in nearly 40 years as consumers slashed spending as they faced a recession, job losses and tighter credit.
The toy category, usually expected to weather economic downturns better than others, also took a hit and many in the industry worry when their consumers will return.
"It'd be foolish if we don't think the economy is a challenge," said Soren Torp Laursen, president of Lego Americas. "Despite tough conditions, there is good business to be had for us," he said during an interview at the Toy Fair.
Europe-based Lego announced a multiyear licensing deal with Walt Disney Co (DIS.N), through which it expects to make games for 2010 based on Disney Pixar's "Toy Story", "Cars" and "Prince of Persia" films.
A giant red cube hung with its name hung over the Lego booth, where it also showed off gadgets such as a functioning digital camera, and MP3 player built with the trademark Lego blocks through a deal with Digital Blue.
Techno Source's Rubik's Cube is getting a major make-over this year. The latest version of the cubic puzzle is electronic and has touch sensors. That means squares can be moved by just touching them, while the original cube needs manual effort.
An internal memory lets players save the puzzle or ask for a hint when stuck. The new version costs $150, while the classic one can be found for about $10.
At the event, companies courted retailers big and small as they competed for shelf space in what promises to be a tough year for sales.
Dozens of people walked the aisles and a Starbucks kiosk saw brisk sales, signs that looked "very encouraging," said Jonathan Samet, Group Publisher of the Toy Insider magazine.
"Knock on wood," Alita Friedman of Pretty Ugly LLC said about the attendance on Sunday and the company's outlook for 2009. The company makes soft toys called Ugly Dolls.
Mattel, which faced a 11-percent sales drop in the past quarter, is betting on Barbie, Elmo gloves and a grown up Dora the Explorer this year. Rival Hasbro Inc HAS.N has its hopes pinned on G.I. Joe and Transformers toys that will follow this year's summer movies, after a 5 percent sales decline in the fourth quarter.
While many toy manufacturers count retailers such as Wal-Mart Stores Inc (WMT.N) and Target Corp (TGT.N) as major customers, some prefer to stay in specialty stores.
Ugly Dolls, for instance, are absent at Wal-Mart but can be found at FAO Schwarz stores.
Melissa & Doug, a private manufacturer of wooden board games and plush toys, is introducing a line of self-contained travel games this year. Its toys can be found at Toys "R" Us and Amazon.com (AMZN.O).
Still others make toys just for the kicks.
Jailbreak Toys, a small New York-based company makes figures of famous personalities from Mark Twain to Mahatma Gandhi as collectibles, each for $5.99.
The latest in its lineup: "The Obama Action Figure." (Reporting by Aarthi Sivaraman, editing by Martin Golan)