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Barbie boosts Mattel's revenue

Nearly every division at the toy maker posts gains from strong holiday sales. Profit for the year jumps 42%.

January 30, 2007|Abigail Goldman | Times Staff Writer

The holidays left Barbie looking a little perkier.

After dragging down Mattel Inc.'s fortunes for years, the company's biggest brand began regaining her footing in 2006, helping drive better-than-expected sales and earnings at the El Segundo-based toy maker.

Mattel also received a boost from the guffawing hit toy T.M.X. Elmo and play vehicles based on the movie "Cars."

"The sales surprise was awesome," said toy industry analyst Sean McGowan of Wedbush Morgan Securities in New York. "They had a fabulous fourth quarter in what was the best toy season in a long time."

Mattel, the nation's biggest toy maker with nearly $6 billion in annual sales, said net income for the quarter ended Dec. 31 rose 3% to $286.4 million, or 75 cents a share, up from $279.2 million, or 69 cents a share, a year earlier.

Sales rose 14% to $2.1 billion.

Investors, however, worried that Mattel's gains were not sustainable. After briefly hitting a 52-week high early in the day, the company's shares settled down to $23.97, up 1 cent.

Some financial analysts shared investors' wariness. Citigroup, which rates the stock "hold," said it was maintaining a cautious stance because it was not yet convinced of a turnaround for Barbie, considered the world's most profitable toy.

What's more, some on Wall Street worried that the company would have a tough time matching 2006's hits.

Even if it stays popular, T.M.X. Elmo probably won't carry the must-have cachet it enjoyed during the holiday season. And toys based on "Cars" already are being moved to the back shelves at some stores to make way for what sellers hope will be this year's hot movie tie-ins: toys based on "Spider-Man 3" and "Transformers" from Mattel competitor Hasbro Inc.

Other analysts said they were more optimistic about the company's future after Monday's earnings report, which detailed strong across-the-board performance and gains in nearly every Mattel division.

"We think it's just the beginning," said Gerrick Johnson, an analyst at BMO Capital Markets in New York who rates the stock "outperform." "They executed so well on so many different things, and the execution is not something that comes and goes in a quarter. It's something that continues."

Part of the success comes from a management shake-up 14 months ago. Neil Friedman, former head of the company's Fisher-Price baby and pre-school division, took over as president of boys and girls toys in October 2005.

Chuck Scothon, Friedman's choice to run the Barbie line, revamped such doll-related toys as the Hot Tub Party Bus and in 2006 helped Mattel report its first annual domestic sales gain since 2003. Although worldwide Barbie sales last year were flat, it was an improvement after two years of declines.

Barbie has suffered flat or falling sales in six of the last nine years, losing market share to the pouty-lipped, midriff-baring Bratz dolls from Van Nuys-based MGA Entertainment Inc.

Fisher-Price was the real star of Mattel's broad line last year, McGowan said, with Elmo and toys based on Nickelodeon shows "Dora the Explorer" and "Go Diego Go." T.M.X. Elmo also helped bring parents back to toy aisles and fueled sales of the division's other Elmo toys, McGowan added.

Those hits propelled Fisher-Price's fourth-quarter sales up 16%. For the year, Fisher-Price posted a 12% sales gain to $2.27 billion.

Mattel's boys and girls brands, which include Barbie, Matchbox and the newly acquired Radica electronic toys, gained 17% in the quarter and 9% for the year.

Entertainment-related toys, helped along by "Cars," gained 62% in the quarter and 34% for the year.

Mattel's American Girl brand, which had posted double-digit growth for the previous two years, reported sales up 2% in the quarter and 1% for the year.

For the year, Mattel said net income jumped 42% to $592.9 million, or $1.53 a share, up from $417 million, or $1.01 a share, in 2005. Sales rose 9% to $5.7 billion from $5.2 billion.

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