Holiday shopping has not gotten off to a spectacular start, to say the least. Despite all the talk of an economic recovery, ShopperTrak reported that weekly retail sales were down 18% the week ending December 5, 2009, over the previous week, which included Black Friday (typically the year's hottest shopping day).

The news was sobering, especially when compared to last year. Sales were actually 0.3% worse than the same week in December, 2008, when the financial market meltdown was still fresh and consumer fear was running high. However, every Christmas there are at least a handful of items that are deemed "must haves." Retailers and economists are pinning their hopes on the companies that produce those toys, gifts and goods to help turn the tide – or at least stem the hemorrhaging – this holiday season. Here are the companies to watch. (The tips in Holiday Spending Or Spending Holiday? will have you singing "Joy to the World" well into the New Year.)

  • Cepia LLC
    This year the demand for the electronic Zhu Zhu Pets hamsters recalls the Cabbage Patch craze of the 1980s. The manufacturer is a privately held company - Cepia LLC – based in St. Louis, Missouri. The line of toys, which were originally named "Go Go Pets," was launched for local distribution in Phoenix and the surrounding areas. They were renamed Zhu Zhu Pets and the line went national this fall through big box stores including Toys R Us and Wal-Mart. The "frantically furry" pets and their accessories became an immediate hit and have sold out in retail stores and periodically even online. Although the company had to quickly quash reports that the sell-out toy has high levels of potentially hazardous metals, it did so with passing grades from consumer health and safety certification testing and concerns.

  • Nintendo (OTC:NTDOY)
    The gaming industry watched overall sales slump in November and Nintendo joined competitors in slashing prices on software. However it has new offerings targeted to eager buyer segments including the Wii Sports Resort game and Wii Fit Plus for budget-conscious fitness freaks that have dumped their gym memberships to work out at home. While its sales are down year-to-year, the company did announce that it sold 550,000 Wii consoles alone during Thanksgiving week.

  • Hasbro, Inc. (NYSE:HAS)
    If you have an elementary or middle school-aged boy, chances are good that at least one of the items from the Nerf 'n Strike product line is on his wish list. Hasbro is a globally-recognized toy manufacturer with industry-leading brands including Playskool, Tonka, Milton Bradley and Park Brothers. The company is faring the recession well. It netted a 1% increase in year-to-year net revenues for Q2, due in part to growth in its Nerf product line. And just in time for Christmas, it announced a quarterly cash dividend for common stock shareholders.

  • Amazon (Nasdaq:AMZN)
    In addition to firmly holding its place as the world's largest online retailer, Amazon's own product – the market-leading Kindle reader – has blown away its competition. So far, critics have given two thumbs down to Barnes & Noble's "Nook" ebook reader, and Sony has missed the Christmas season with its yet-to-be unveiled Daily Edition product. Its latest generation Kindle features 3G global wireless capability, longer battery life, automatic syncing with computers and mobile devices, and a built-in PDF reader. Having recently announced a Q3 net sales increase of 28%, and acquisition of the highly-touted shoe company Zappos.com, Amazon is not only potentially one of this holiday season's saviors, but also a prudent investor's stock pick.

  • WalMart (NYSE:WMT)
    The recession has made bargain hunters of us all. This global powerhouse of big box retailing carries not only almost every "must have" toy on childrens' wish lists, but also discounted grocery, home, automotive and sporting good items in demand during the holidays. On top of that, the company has aggressively invested in rolling out a revamped line of Great Value private label products to capture market share among budget-conscious consumers. Coupon-clipping shoppers responded quickly, with sales inching up 0.2% within eight weeks of the not-even-completed restaging.

  • LEGO
    Long a perennial favorite of kids of all ages, the privately-held and family-owned LEGO company has maintained its new product momentum well over the past few years. Its Star Wars and Indiana Jones product lines are strong sellers this year, despite being eclipsed by other "hot" items like the Zhu Zhu Pets line and electronic gaming systems, software and accessories. The Denmark-based construction toy manufacturer has subsidiaries and branches worldwide and sells its products through retailers in more than 130 countries.

Conclusion
Though holiday shopping may not fully recover for quite some time, these companies are doing their best to sustain themselves. And it's true that this year may not be the most elaborate in terms of gifts and spending, but rest assured that retailers and product manufacturers have taken note, and are working to cater to a tighter budget. (Holiday expenses can drown you in debt. Find out how to avoid this festivity hangover, in Keep Holiday Debt From Snowballing.)

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