2nd UPDATE: Mattel 1Q Profit Falls On Higher Expenses;Sales Up
15 Abril 2011 - 12:15PM
Dow Jones News
Mattel Inc.'s (MAT) first-quarter earnings fell 33% on higher
legal and advertising fees, but sales rose on the strength of
Barbies and other dolls.
The largest U.S. toy maker by revenue has benefited from sales
of merchandise tied to the film "Toy Story 3," and the resilience
in its iconic Barbie dolls, along with cost-cutting efforts.
However, its Fisher-Price division and Hot Wheels and Matchbox car
categories have lagged.
"While recognizing we are very early in the year, our solid
first quarter results" demonstrate progress the company is making
"in the face of a challenging cost environment and a continuation
of the difficult economic climate," Chief Financial Officer Kevin
Farr said on a conference call with analysts.
Mattel reported a profit of $16.6 million, or 5 cents a share,
down from $24.8 million, or 7 cents a share, a year earlier. Sales
rose 8.2% to $951.9 million. Analysts polled by Thomson Reuters had
most recently forecast earnings of 5 cents on revenue of $904
million.
Earnings fell as advertising and promotion expenses climbed
8.1%, while selling and administrative expenses, which include
legal fees, were up 14%. Considerable money is being spent by
Mattel on a copyright lawsuit against MGA Entertainment over the
popular Bratz dolls. Chief Executive Robert Eckert said during the
conference call a jury began deliberating on the long-standing case
Monday.
Eckert said Mattel has put in place high single-digit price
increases, something retailers may not be thrilled about, but
understand in the face of their own grappling with higher energy,
labor and other costs.
Executives also said inventory is higher than a year ago, but
didn't say by how much. The increase is necessary, they said,
because of new product launches, low inventory levels last year and
a later Easter, which means later seasonal toy buying.
As far strengths and weaknesses, sales of Mattel's girls and
boys brands unit--its biggest arm and the one that includes Barbie
and Hot Wheels--grew 15% as Barbie sales rose 14%, and Hot Wheels
sales were up 6%. Sales of Fisher-Price brands decreased 2% with
the discontinuation of the Sesame Street product line, while its
American Girl brands increased 4% on strong sales of Kanani, Girl
of the Year 2011.
Domestic sales rose 7% and international sales grew 10%. In
Europe, growth in the U.K., Italy, Germany and Central Europe were
partially offset by declines elsewhere, executives said. Growth in
Latin America was strong throughout, with double-digit percentage
growth in Brazil and Mexico. There was growth across most markets
in Asia Pacific, with the strongest being China, Australia, and
India.
Gross margin rose to 49.7% from 49.1%, aided by higher pricing,
but hurt by higher manufacturing costs.
Mattel said it bought back 4 million shares during the quarter
for about $100 million.
Rival toy maker Hasbro Inc. (HAS) on Thursday reported its
first-quarter earnings fell 71%, missing analysts' estimates, as it
spent more on product development and saw double-digit sales
declines in its games and puzzles, girls and preschool
categories.
Mattel shares are up 4.6% to $26.91. Hasbro is ahead 1.3% to
$44.98.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
-Melodie Warner contributed to this article
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