Mattel, Hasbro Earnings Fall, but Relief Seen

Mattel Inc. and Hasbro Inc., the world’s two largest toy makers, said Thursday that second-quarter earnings fell as their biggest customer, Toys R Us Inc., bought less merchandise.

El Segundo-based Mattel, the industry leader with brands such as Barbie, Hot Wheels and Fisher-Price, said net income dropped 20%. At Hasbro, the maker of G.I. Joe, Tonka trucks and Milton Bradley games, profit tumbled 58%.

It’s the second quarter in a row that the toy makers’ results were hurt by declining sales to Toys R Us. The world’s largest toy seller has been paring its inventory to cut costs and fend off competitors such as Wal-Mart Stores Inc. But sales are expected to rise in the second half as retailers prepare for Christmas.

“The cloud has lifted in terms of the Toys R Us problem,” said Harold Vogel, an analyst with Cowen & Co.

Forecasts for second-half sales helped boost both stocks. In New York Stock Exchange trading, Mattel shares rose $2.69 to close at $40.94; Hasbro gained $1.13 to $39.94.

Mattel said it is confident it will increase earnings per share by 18% for the year and meet its own earnings goal of $1.95 a share. Pawtucket, R.I.-based Hasbro also told analysts it expects double-digit earnings growth.

Both toy makers warned in March that first-quarter sales would be below expectations because of declining orders from Paramus, N.J.-based Toys R Us.

Mattel’s sales dropped 11%, to $861.5 million from $972.7 million, while net income fell to $60.4 million, or 20 cents a share, from $75.6 million, or 25 cents, a year earlier. The results matched the average estimate of analysts polled by First Call Corp.

Fewer orders from Toys R Us reduced sales by $72 million. Sales also decreased about $28 million due to discontinued product lines, while the impact of the strong dollar also trimmed sales, the company said.

Mattel also said it completed the purchase of Pleasant Co., the closely held maker of American Girl dolls and books. The move should add to 1998 earnings, it said.

Net income at Hasbro fell to $5.5 million, or 4 cents a diluted share, from $13 million, or 10 cents, a year earlier. It was expected to earn 3 cents.