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Profits Decline at 2 Toy Makers

Earnings: Third-quarter results are off 22% at Mattel, in line with estimates. Hasbro's net income tumbles 84% on slowing sales.

October 20, 2000|ABIGAIL GOLDMAN | TIMES STAFF WRITER

Mattel Inc. executives made news Thursday for not making much news: For the first time in more than a year, the company reported quarterly results that were in line with analysts' estimates and not qualified by any surprises.

That was in contrast to rival Hasbro Inc., which reported Thursday that its earnings were off 84%, due to slowing sales and increasing losses from its interactive operations.

Mattel Chief Executive Robert Eckert said third-quarter earnings before charges fell nearly 22%, to $174.3 million, compared with $222.2 million a year ago. Sales were essentially flat compared with a year ago, at $1.58 billion.

Including one-time events, the El Segundo-based toy maker lost nearly $336.9 million for the quarter, the result of a $441-million charge for the sale of its disastrous Learning Co. division and a $74-million restructuring charge.

Eckert said the sale of Learning Co., which had cost Mattel about $1 million per day, officially closed Wednesday. Privately held Gores Technology Group, a Los Angeles buyout firm, has taken over the software company in exchange for a portion of its value or sale price.

Mattel, which essentially gave away Learning Co., acquired for $3.5 billion in 1999, will share in any profit within the next five years, but is no longer responsible for its ongoing costs.

Investors were pleasantly surprised by the company's results, after days of Wall Street whispers that Mattel would miss its target numbers.

"I think that most people on Wall Street understand that turnarounds take time," said Brian McGough, leisure industry analyst at Morgan Stanley Dean Witter. Mattel shares rose 38 cents to close at $11.44 on the New York Stock Exchange.

Hasbro said net income fell to $13.8 million, or 8 cents a diluted share, compared with $85.2 million, or 43 cents a share, for the same quarter a year ago. Its shares rose 19 cents to close at $10.31 on the NYSE.

The Pawtucket, R.I.-based company warned last week that its performance would fall well short of previous estimates because of a sharp slowdown in sales of Pokemon and Star Wars products. It also said it was slashing its work force by about 5%.

Hasbro's revenue was flat at $1.07 billion.

"Even with challenging comparisons against last year's record results, I'm not pleased with our third-quarter performance," Hasbro Chairman Alan Hassenfeld said in a statement.

Hayley Kissel, leisure industry analyst for Merrill Lynch in New York, said Mattel fared better as a result of its focus on core brands as opposed to Hasbro's strong ties to always-iffy entertainment-related products.

That means that when Star Wars and Pokemon were big last year, Hasbro enjoyed the benefits, Kissel said. But without a strong entertainment product this year, the company is suffering.

Mattel's domestic sales rose 2%, but sales fell 5% overseas. The company's two largest properties, Barbie and Fisher-Price, increased during the quarter.

Both companies have reported missed sales and continued pressure in the fourth quarter as a result of a shortage of computer chips, which power increasing numbers of interactive toys.

*

Times wire services were used in compiling this report.

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