Mattel’s 1st-Quarter Loss Less Than Expected

Increased domestic sales of Barbie dolls and products tied to “Toy Story 2” helped Mattel Inc. halve its first-quarter loss, the troubled El Segundo toymaker said Wednesday.

The company lost $6.2 million, or 1 cent a share, on continuing operations in the three months ended March 31, compared with a $12.6-million deficit, or 3 cents a share, in the first quarter of last year. Analysts were expecting Mattel to match last year’s red ink, according to First Call/Thomson Financial.

Sales from continuing operations rose less than 1%, to $693.3 million, from $688.3 million in the same period last year. Mattel shares slipped 6 cents, to $11.69, in New York Stock Exchange trading.

Overall, Mattel lost $171.2 million in the quarter, which included a $126.6-million loss, or 30 cents a share, from its Learning Co. unit, and an after-tax charge of $38.4 million, or 9 cents a share, for severance pay and loans forgiven to departed executives. A year earlier the company posted a profit of $3.1 million, or 1 cent a share.

In a conference call with securities analysts Wednesday, executives said Mattel’s basic toy lines showed strength from January to March. U.S. Barbie sales, helped by more-effective advertising and in-store promotions, rose 14% in the first quarter. Sales of the fashion-conscious doll grew only 7% worldwide because of a 5% decline in markets abroad, the company said.

“They’ve made a lot of changes and done some repositioning of Barbie to attract different age segments,” said John Taylor, toy industry analyst at Arcadia Investment Corp. in Portland, Ore., who rates the company a “market outperform.”

Figures from “Toy Story 2,” the computer-generated hit movie from Walt Disney Pictures and Pixar Animation, and from “Max Steel,” a new series that debuted on the WB network in February, boosted sales in the company’s entertainment category by 22% domestically and 14% worldwide for the quarter, Mattel said.

But demand sagged for other cartoon-related toys, such as “Winnie the Pooh” and Disney plush dolls. Sales in that category grew 2% worldwide, because of strong sales of Fisher-Price toys.

Mattel is reeling from nearly $300 million in losses incurred last year by Learning Co., the creator of “Carmen Sandiego” and other children’s software. Mattel, which paid nearly $3.6 billion for the company in 1998, said this month it was putting it up for sale. The division’s problems turned Mattel’s once-growing profits into losses and led to the February resignation of Chief Executive Jill Barad.

The size of executive payouts drew questions from some analysts.

“We’ve acted very ethically in doing what we did,” interim CEO Ronald Loeb told analysts. “Our real focus was getting on with business and getting as many diversions as possible behind us.”

Barad and President Ned Mansour left, and former Chief Financial Officer Harry Pearce retired. A company spokesman declined to identify the officers whose departure generated the charge, or how much each received.

Mattel executives said they expect to reap profits from a range of toy-friendly entertainment releases later in the year, including a TV spinoff of “Toy Story” and a film featuring Nickelodeon’s “Rugrats” due around Thanksgiving.

For the year, the company expects both earnings and revenue to grow in the single digits, said CFO Kevin Farr.