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Mattel's profit doubles but falls short of estimates; shares fall

Toy maker posts a second-quarter profit of $51.6 million, or 14 cents a share, a penny lower than investors were expecting. The stock loses nearly 10%.

July 17, 2010|By Andrea Chang, Los Angeles Times

Mattel Inc. reported robust second-quarter sales fueled by strong demand for its Barbie, Hot Wheels and Toy Story 3 lines, but earnings just missed Wall Street estimates.

For the quarter ended June 30, the nation's largest toymaker reported profit of $51.6 million, or 14 cents a share, more than double its year-earlier profit of $21.5 million, or 6 cents.

Worldwide sales increased 13% year over year, helped by a 6% increase for Barbie dolls and accessories and an 11% gain for Hot Wheels toys.

"What a difference a year makes," Chief Executive Robert A. Eckert said in a call with analysts. "Last year at this time, Mattel, along with many other consumer goods companies and retailers, was lamenting how much further the economy was going to decline. And while reports remain mixed on whether or not we're out of the woods, I can tell you that I'm very pleased with the company's performance for the quarter."

Still, investors had expected earnings of 15 cents a share, which sent Mattel's stock down 9.5% to $20.81 on Friday.

Gerrick Johnson, a toy analyst at BMO Capital Markets, said despite the 1-cent miss, he "wasn't discouraged by what was in the earnings report."

"They nailed the top line, they nailed the gross margin," Johnson said. "I see a lot of strength from Mattel products. I see core lines like Barbie and Hot Wheels gaining shelf space, I see good takeaway, I see good product development."

Weaker segments included core Fisher-Price toys, which saw flat sales, and American Girl brands, which saw sales decline 4%.

Although Eckert said the results provided good momentum going into the all-important Christmas season, he acknowledged that retailers were still "cautious and conservative" and would probably remain so through the holidays.

Johnson noted that the second quarter is generally a quiet time for toy makers and said strong performance in the first half of the year doesn't necessarily predict a good holiday season.

"There's not a lot going on: It's summertime, the kids aren't buying toys — they're out playing baseball and at the beach," he said. "So it's not a very important quarter to judge a toy company."

Last quarter also marked the debut of Mattel's Monster High line, the first time the El Segundo company launched a toy concept as a complete franchise.

Besides fashion dolls, the monster-themed line — which targets tween and teen girls — features apparel and accessories and a website with short animated "webisodes." A book series and feature film are in the works.

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