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Move over Barbie, Hannah Montana is here

NEW YORK (MarketWatch) -- A fight is brewing in the doll aisle.
This holiday season, Barbie will have to make room for a new girl on the block. Her name is Hannah Montana, the teen pop sensation from the hit Disney (DIS:

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DIS 34.38, -0.07, -0.2%) TV series. Hannah is "hot as a pistol," said Bob Giampietro, a senior vice president at Toys R Us, in a recent interview.

With Hannah and other dolls based on characters from television-film "High School Musical" and DVD-movie "Disney Island Princess," the stage is set for one of the most competitive doll lineups in recent years, industry watchers said.
"It's unusual you have four such strong brands out in this category," said toy consultant Chris Byrne. "For years Barbie has dominated this aisle and it was very difficult for anyone to compete with it. Now you have these entertainment brands that have captivated kids."
This isn't the best news for Mattel Inc., Barbie's parent. Mattel (MAT:

Mattel, Inc 21.09, +0.32, +1.5%) has been facing soft U.S. Barbie sales ahead of the key sales period for toymakers. This year's holiday shopping is rising to a new level of importance for Mattel, which admitted in a recent conference call that they're a "little anxious."

Recovering from the recalls
The toymaker is looking to heal the wounds from the August and September recalls of 21 million toys, including those produced under licenses for such characters as Barbie, Big Bird and Polly Pocket. Mattel's toys were found to contain dangerous magnets or lead paint.
For the three months ended Sept. 30, U.S. Barbie sales were down 19%. It was the third straight quarter of declines after the Barbie brand showed signs of stabilizing in 2006.
Toy insider Byrne isn't discounting Barbie's brand appeal this holiday season.
"Going into the fourth quarter, I think it will be a strong quarter for Barbie," he said. "I think it will certainly recover."

Barbie is counting on doll sales from this year's princess tale, "Barbie as the Island Princess." The DVD has ranked high in Billboard's Top 10 selling DVDs since it hit the market in mid-September, but it has yet to spark significant doll sales, analysts said.
The companion doll, Princess Rosella, is being sold separately for $17.49 on ToysRUs.com, where it is the top selling doll so far.
Another item that may boost the brand -- and lure tech-obsessed girls -- is Barbie Girls.
The MP3 player, sold for $59.99, connects to a computer and unlocks a virtual world where users can create characters, go shopping and chat with other children. The idea is a take on the rise of popular online social networking sites, Facebook and MySpace. The BarbieGirls.com Web site has 6 million registered users, Mattel said.
The Barbie brand is "definitely improving. It's not where it needs to be, but it's going in the right direction," said Jim Silver, editor in chief of Toy Wishes magazine.
However, Gerrick Johnson, an analyst at BMO Capital Markets, is skeptical Barbie has the moxie to rebound this holiday season.
"We think there is some weakness in key toys and brands, namely Barbie," Johnson wrote in an Oct. 16 research note. "It is also our belief that the retail environment for toys is soft right now, a situation we expect to persist."
Johnson is bearish when it comes to Mattel and rival Hasbro Inc. Both stocks are rated sells.

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