TOYS: Trouble in the Cabbage Patch

In the toy and game business, yesterday's craze is today's closet stuffer. And no company knows that better than Coleco. Its cuddly Cabbage Patch Kids were once every small child's dream, but sales peaked in 1985 and have been falling ever since. In 1986 Coleco made a seemingly shrewd move in buying the company that held the license to the popular Trivial Pursuit game, but soon yuppies began to grow tired of asking one another questions like "Who played the Lone Ranger's faithful Indian companion?"

Now there is big trouble in the Cabbage Patch. Citing a debt load of about $300 million, incurred mostly during years of heady expansion, the firm said last week it would lay off 35% of the managerial staff at its West Hartford, Conn., headquarters and 50% of its production employees. But as dramatic as those steps were, Wall Street is not sure they will be enough to keep Coleco out of bankruptcy.