Shares of Mattel Soar 18% on Strong Bounce in Earnings

Mattel Inc.’s net income grew 40% in the third quarter, driven by strong gains in international toy sales and modest domestic improvements, the company said Thursday.

The El Segundo-based toy maker’s stock rose more than 18% on the news, its biggest one-day gain in 15 years. Mattel closed up $2.93 to $18.73 on the New York Stock Exchange.

Mattel, the maker of Barbie dolls and Matchbox cars, reported net income of $280.6 million, or 63 cents a share, for the three months ended Sept. 30. That’s up from $199.8 million, or 46 cents a share, during the same period a year ago.

Earnings in the most recent period included a $5.5-million pretax charge related to Mattel’s ongoing financial realignment and a one-time gain of $27.3 million, a payment from Gores Technology Group’s liquidation of Mattel’s former Learning Co. division, which Mattel took over last year.

Sales for the quarter grew 6% to $1.67 billion, from $1.58 billion a year ago. While U.S. sales grew 2%, international sales rose 17%, the company’s ninth straight quarter of sales gains abroad.

Despite Mattel’s upswing this year, Chief Executive Robert Eckert warned that the shaky economy and disruption at West Coast ports could weigh heavily on the company’s performance in the critical fourth quarter.

“We are making progress toward achieving our goals, but we are also experiencing some major challenges domestically,” Eckert told analysts in a conference call before the market’s open. “Last year we were faced with the devastating effects that the events of Sept. 11 had on the economy and consumer confidence. This year it has been an uncertain stock market, the threat of impending war and finally the unfolding drama of the West Coast port dispute.”

Eckert said Mattel has $75 million to $100 million in inventory stalled on ships off the coast of California. How long that will take and the cost to the company, he said, is unclear.

Based on the problems at the ports and with the economy, Sean McGowan, a toy industry analyst with Gerard Klauer Mattison in New York, said he expected flat to modestly higher results for Mattel’s fourth quarter. He said he was pleasantly surprised by Thursday’s report and the longer-term outlook.

“It’s hard to find something to be concerned about in these numbers,” McGowan said. “They seem to have taken a lot of steps to get themselves a better cost structure so that when the shipments are there, they will be very profitable.”