Toys R Us is fighting back against Wal-Mart on toy prices this holiday season.  Since Wal-Mart began cutting prices on toys in September (see 'Toy Price Competition Heats Up'), Toys R Us has fought back aggressively by undercutting Wal-Mart' prices on promoted toys.  According to Reuters, which compared prices between the two chains on toys advertised in Wal-Mart's holiday toy e-mail, Toys R Us was cheaper on half the products, by margins as high as 33%; Wal-Mart's prices were cheaper on the products it had at lower prices by much smaller margins. 

Toys R Us is considering the sale of its toy stores (see 'Toys R Us on the Block'), but is apparently not surrendering pricing supremacy to Wal-Mart this season in an effort to maintain market share. 

The retail toy business is already littered with casualties from last year's holiday season.  KB Toys, currently in Chapter 11 bankruptcy, is closing large numbers of stores (see 'KB Toys Plans to Close More Stores'); FAO Schwartz stores remain closed after its bankruptcy and asset sale.