The strong performance of two key super-categories helped to offset losses. Sales of Action Figures & Accessories were up 8 percent over 2006, while Vehicles experienced a 6 percent increase over the same time period.

The most significant losses were experienced in Infant/Preschool, Outdoor & Sports Toys, and Dolls with respective declines of 5 percent, 5 percent and 8 percent.

Top properties for the year included Barbie, Bratz, Cars: The Movie, Crayola, and Dora the Explorer, with properties such as Air Hogs, Hannah Montana, Spider-Man, Transformers, and Webkinz experiencing the most growth. Licensed toys represented 27 percent of total industry sales in 2007, with Cars: The Movie, Disney Princess, Dora the Explorer, Spider-Man, and Star Wars leading the list of best-selling licensed toys.

According to NPD, an emerging trend in the industry is the increase in sales of connected Web play toys.

“Connected Web play toys, which marry a physical toy with ongoing digital play opportunities via the Internet, is a relatively new phenomenon that we've seen emerge within the toy industry, ” said Anita Frazier, industry analyst, The NPD Group. “Thanks in large part to the popular Webkinz brand, this type of play is expanding into new categories and across many properties. ”

Channel sales performance revealed surprising results, as 2007 marks the first in several years that the Mass Merchant/Discount channel has not experienced an increase in its dollar share of the toy industry, coming in at 55 percent. Dollar sales increased in the Online/Internet channel by 9 percent, bringing its share of toy industry sales to 7 percent in 2007.

“Despite economic concerns, last year ’s results speak to the resiliency of both the toy industry and parents ’ desire to delight children with new, innovative and fun toys to play with, ” said Frazier. “I ’m encouraged by the innovation within the toy industry and am eager to see the new product offerings at this year ’s Toy Fair. ”

*NPD is following the National Retail Federation ’s (NRF) recommendation of adding a 53rd week to the 2006 retail calendar year (February 2006 – January 2007). Due to the extra week in calendar year 2007, which falls in Jan ’07 and represents approximately 2 percent of annual dollar sales, care should be taken when comparing any 2007 data to prior years.