Feb 16 - Wal-Mart Stores Inc made a few wrong moves in the all-important holiday toy sales game, a timely blessing for Toys R Us Inc, which is looking to go public.

Wal-mart in New Jersey, USA

From slashing its selection of toys to waiting until the 11th hour to convert garden centers into temporary toy aisles, the industry Goliath made costly mistakes in the biggest selling season of the year, analysts and manufacturers said.

"Wal-Mart, from everybody I talked to, did not have a good fourth quarter," with some toy makers calling it a "disaster," said Jim Silver, toy analyst at Timetoplaymag.com.

Wal-Mart's biggest mistake was reducing its selection of toys, Silver said.

Wal-Mart declined to comment before its February 22 earnings report.

But Carter Keithley, president of the Toy Industry Association, said in an interview on Sunday, "What I have heard is they (Wal-Mart) decided they have made a mistake ... that they are going to re-expand their toy space."

The missteps by the world's largest retailer came as Toys R Us flexed its muscles by opening hundreds of temporary stores in malls, touted a wider array of exclusive toys and offered aggressive Black Friday promotions to win holiday shoppers.

"We always look for products that aren't carried by the limited assortment mass merchant chains. That's clearly a major focus," Toys R Us Chief Executive Jerry Storch told Reuters.

Last week, Storch said he was "very excited about 2011," though he declined to comment on the timing of the IPO.

TOY STORES REBOUND

Discount chains such as Wal-Mart beefed up their toy assortment years ago, enticing parents to spend more. Then, chains pared back assortments to focus more on basics.

"I don't think the shelf space at discount (chains) is back to the levels where it was in the early 2000s or mid 2000s," Vic Bertrand, chief innovation officer of Canadian toymaker Mega Brands Inc, said at the Toy Fair in New York.

"I think that helps other retailers, especially a category killer like a Toys R Us," Bertrand told Reuters.

Some also questioned the not-so-prominent placement of toys at Wal-Mart's stores.

"They had the toy department at the back of the store and they expect the consumers to walk the whole store to get to the toy department," Silver said.

By Dhanya Skariachan