Mattel Tickles Sales with New Elmo

The toy company is again looking to the fuzzy red Sesame Street denizen to help them build sales and a nice holiday buzz

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With a lot of giggling of their own, Good Morning America host Diane Sawyer and her colleagues unveiled the newest model in Mattel's (MAT) long-running Elmo franchise. The new T.M.X. Elmo laughs, slaps its knee, and rolls around on the floor before righting itself. "Again," it says. Already dozens of the new dolls are being offered for sale on eBay (EBAY) for as much as $93.99, more than twice the toy's $39.99 list price.

Down the street from the Good Morning America studio, the Toy 'R' Us flagship store in Times Square opened an hour earlier than usual to accommodate a line of fans looking to purchase the new Elmo. The store sold out of its initial stock in two and a half hours, as cashiers in red Elmo T-shirts busily rang up sales.


  "I believe it will be a big success," Gerald Storch, Toys 'R' Us chairman and CEO told BusinessWeek. "It's exactly what the industry needs (see, 5/25/06, "Mattel Needs a Knock-Me-Out Elmo")."

In the past, the furry red Sesame Street character has giggled, danced the hokey pokey, and performed the limbo in a Hawaiian shirt. But this year, Mattel refused to reveal Elmo's latest trick until the day the doll went on sale. To build buzz for the toy's 10th anniversary, boxes of the T.M.X. Elmo were shipped the night before to retailers—most of which had agreed to buy it sight unseen. Some stores installed countdown calendars, tearing off the days until the toy's release date.


  The first Tickle Me Elmo became a toy-biz phenomenon after it launched in 1996. The T.M.X. in the new model's name stands for both Tickle Me Ten and Tickle Me Xtreme, Mattel says. The industry hasn't seen a breakaway hit product like the first Elmo since the fuzzy Furby doll craze in 1998. Toymakers and retailers love the frenzy-inducing items because they bring more traffic to the stores and lift sales of other products.

"There's a halo effect across everything," says Neil Friedman, president of Mattel Brands. Friedman released the first Tickle Me Elmo at Tyco Toys, which Mattel later acquired.

Mattel is helping fuel a potential Elmo craze by manufacturing fewer than it normally would, says Jim Silver, co-publisher of Toy Wishes, an industry trade publication. He estimates that the company is making many fewer than its usual run of about 1.5 million Elmos. That has retailers chomping at the bit. "I have never seen the item," says Robert Weinberg, senior vice-president of merchandising at retailer KB Toys. But even so, "We really want a lot more."

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