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Mattel Shares Slip Amid Weak Sales, Forecasts

CEO Eckert blames soft economy for inflated inventories. Toy maker plans marketing blitz.

June 19, 2003|Karen Robinson-Jacobs | Times Staff Writer

Shares of Mattel Inc., the world's largest toy maker, dipped slightly Wednesday, a day after Chief Executive Robert Eckert told analysts the company has been underperforming and faces challenges in boosting sales this year.

The stock of the El Segundo-based company lost 54 cents, or 2.5%, to close at $20.73, after dropping as low as $19.94 on the New York Stock Exchange.

At Mattel's annual analysts meeting late Tuesday, Eckert said continued softness in the U.S. economy has resulted in inflated inventories. Supplies of products already on store shelves at the nation's largest retailers are on average 11% ahead of last year's levels, he said, with little evidence that consumers will soon pick up the slack.

And "the few toys that are selling well this spring are not Mattel's," he said, predicting a "sizable near-term bump in the road" for the company.

Eckert did not offer any earnings guidance. But some analysts interpreted his comments as a signal that the home of Barbie and Hot Wheels may miss its targets for the second quarter. The toy maker is forecast to earn 8 cents a share this quarter and $1.30 this year, the average estimates of analysts surveyed by Thomson First Call.

Michael Wallace of UBS Investment Research downgraded the stock to "neutral" from "buy" and lowered his earnings estimate for the current fiscal year to $1.25 from $1.28. Sean McGowan of Gerard Klauer Mattison reduced the stock to "neutral" from "outperform."

"I don't think most people knew that it was as bad, near term, as it is," said Dean Gianoukos, an analyst with J.P. Morgan. "The market's just digesting this new information, and it doesn't see it as positive."

During the fiscal first quarter, Barbie sales were down 1%, and sales of American Girl dolls were off 8%. Mattel's girls division accounts for 44% of the company's $5 billion in annual sales.

Mounting an offensive for the second half of the year, Mattel plans to launch "the largest marketing effort in toy industry history," Eckert said. In addition to signature brands, the company will promote new concepts, such as a hip-hop-style doll called Flavas to compete with MGA Entertainment Inc.'s Bratz.

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