Mattel 1st-quarter net income falls as sales of Barbie and Hot Wheels decline

NEW YORK, N.Y. – Mattel Inc. said Monday that its first-quarter profit dropped 53 per cent, pulled down by costs tied to an acquisition and lower sales for Barbie and Hot Wheels.

Results for the largest U.S. toy maker were below expectations and its shares fell more than 7 per cent in trading. But the disappointing results came during what is typically a slow time for toy sales, so Mattel executives say they remain optimistic.

“We consider the first quarter to be spring training for the toy industry,” said CEO Bryan Stockton. “We continue to have momentum in many key areas and we’re focused on improving our performance in a couple of areas like North America and Fisher-Price.”

Mattel’s toy brands like Barbie, Hot Wheels and American Girl have been perennial bestsellers in the toy aisle. But during the period — the smallest quarter of the year for toy makers — cautious reordering by retailers coupled with the timing related to shipping “Cars 2”-related toys last year, hurt results. That was particularly true in North America, where revenue slid 9 per cent.

Two of Mattel’s most popular brands had declines across the globe. Worldwide gross sales for Barbie slipped 6 per cent in the quarter, while sales of other girls’ brands rose 22 per cent. The Wheels segment — which includes Hot Wheels and Matchbox — reported a 6 per cent sales decline.

Meanwhile, Fisher Price, which makes pre-school toys such as Power Wheels, were essentially flat at US$310.2 million, while sales of American Girl climbed 4 per cent on strong sales of the 2012 Girls of the Year, McKenna.

Overall, revenue fell 3 per cent to $928.4 million from $951.9 million a year ago as the currency exchange rate dragged on the El Segundo, Calif., company. That’s down sharply from the $986 million analysts polled by FactSet had expected.

Mattel’s net income fell to $7.8 million, or 2 cents per share, for the three months ended March 31. That’s down from $16.6 million, or 5 cents per share, a year earlier.

Results were impacted by the $680 million acquisition Mattel announced in October of HIT Entertainment, the company behind Thomas the Tank Engine and Bob the Builder. Excluding costs related to the acquisition, adjusted earnings were 6 cents per share, or a penny below what analysts surveyed by FactSet were expecting.

Despite the disappointing quarter, the company said it gained market share in the toy category in the U.S. and Europe, according to data from the NPD Group.

“As is often the case this time of year, we have work to do in certain areas across our portfolio of brands, countries and customers as we prepare to successfully execute the all-important holiday season,” Stockton said.

Mattel Inc. declared a second-quarter dividend of 31 cents per share. The dividend will be paid on June 15 to shareholders of record on May 23.

Shares fell $2.63, or 7.7 per cent, to $31.49 in midday trading. The stock had been up 20 per cent since the beginning of the year.

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