Sure, since this is an issue for you, do bring it up with the other mom, but in a one-on-one visit with no kids involved, or on the phone if a kid-free visit is too hard to arrange.
Be sure she knows that you see the gifting as a sweet and generous impulse. AND, there are so many good reasons not to make it habitual. Give her the reasons that worry you the most, and describe an alternative scenario that would meet your and your children's needs (perhaps a small gift a couple of times a year).
Even if you do that, the practice may continue, depending on the other mom's or daughter's emotional need to keep it up. My daughter has a friend who does this with everybody in his life. The poor guy can't seem to help himself. It appears to be a case of low self-esteem in his case; he can't believe he doesn't need to "buy" other people's friendship.
So if it continues, and you are still uncomfortable with it, you might want to try communicating once again, and inquire as to what the practice means to your friend and her daughter. There might be information there that you can work with.
Since your children have all the toys they need, you could also state simply that you'll be passing the gifts on to children who have less, even though your children will find this distressing. Then explain to your kids your intention, and follow through. They may not understand it now, but it will become part of their understanding about materialism over time.