Glitz Meets Gloom at 1996 Toy Fair, With No Hits in Sight and Sales Slow

FOR 12 years, Pablo Morales has been making an annual expedition from Puerto Rico to the American International Toy Fair to find a hit among the roughly 5,000 new gadgets on offer.

But after a year in which his Puerto Rico chain closed 17 stores in response to competition from huge retailers such as Toys 'R' Us, the toy buyer won't be looking for a blockbuster, just some solid favorites. ''The trends in the States affect us too,'' Mr. Morales says.

The toy industry isn't all fun and games these days - just ask Morales or any of the 40,000 vendors, buyers, and manufacturers who have come to New York this week for the 93rd annual American International Toy Fair.

This year's fair comes at a time when toy-industry turmoil has been a recurring feature on business pages. Mattel's high-profile $5.2 billion bid for rival Hasbro foundered amid bickering. Toys 'R' Us brought the troubled retail environment dramatically into focus by announcing inventory reductions and store closures.

Last year saw uninspired video-game sales and increased plastic and paper costs, only a portion of which could be passed on to consumers. In a difficult retail environment, chains like Ames, Bradlees, and Kmart struggled to stay afloat.

Yet, despite these developments and the apparent lack of a new megahit like Mighty Morphin Power Rangers to save the day, toymakers are upbeat.

George Volanakis, chairman of Toy Manufacturers of America, an industry group based in New York, says US retail sales reached about $20 billion last year, up almost 7 percent from $18.7 billion in 1994. He predicts a further rise to $21 billion this year.

Kicking off the eight-day fair, Mr. Volanakis said the industry last year experienced a boom in speciality-store sales and continued strength overseas.

Dolls, games, and puzzles were among the year's strongest sellers, with new toys such as Pocahontas and Sky Dancers joining classics like Barbie - the best-selling toy of all time - and Monopoly on the bestseller list. But video-game sales fell 20 percent. Finding next year's hot product is a problem. ''There's nothing big right now,'' says toy analyst Harold Vogel of Cowen & Co. in New York.

The Mighty Morphin Power Rangers, the last huge hit, have begun to wane in popularity, a trend Volanakis said was reflected in a 14 percent drop in 1995 sales of male action toys.

''It's still an important toy,'' David Miller, president of the industry association, says of the Power Rangers. ''It's just not at that megahit level.''

Mr. Vogel sees more activity in high-tech, multimedia offerings this year.

Retail difficulties were on the minds of many of the buyers and retailers searching for next season's hit among the toys introduced by the fair's 1,619 exhibitors.

''Our mom and pop stores are going out of business left and right,'' said a California manufacturers' representative. ''The large stores - the Wal-Mart's, the Toys 'R' Us - are killing them.''

Pat Steskal, who has been visiting the Toy Fair from Quakertown, Pa., for six years, sees the same trends. ''For old-time veterans, things are rough,'' she says. ''The heyday is gone, and it's not just Toys 'R' Us. It's just the way the economy is.''