Mattel’s Profit Jumps 12% Despite Barbie Troubles

She’s been a rock star, a doctor and a pilot. But evidence continues to build that Barbie might be taking on a new role: washed-up icon.

Mattel Inc. reported a 12% gain in second-quarter profit Monday, no thanks to the 45-year-old doll. Barbie sales continued their long slump in the three months ended June 30, declining 13% worldwide.

The El Segundo-based toy maker exceeded analysts’ expectations by a penny, fueled by revved-up sales of Hot Wheels cars and American Girl dolls. Net income was $23.5 million, or 6 cents a share, compared with $20.9 million, or 5 cents, for the same period a year ago. Sales were $804 million, up 5%.

“The quarter marks a step forward for Mattel,” said Jill Krutick, an analyst with brokerage firm Smith Barney, in a research note.

But not for Barbie and her hundreds of manifestations, including Queen Elizabeth I Barbie and Hard Rock Cafe Barbie. Though she remains the world’s bestselling doll, the competition is increasingly stiff, especially from MGA Entertainment’s edgy Bratz dolls, who wear clogs, midriff-exposing T-shirts, low-rise jeans and glittery eye shadow.

“Barbie looks a little too adult,” said Steve Meynig, manager of Tom’s Toys in Beverly Hills, where Bratz outsells Barbie 3 to 1. Bratz dolls “look like the people you see in the magazine, the streets.... The Bratz look a little more today.”

In fact, 8-year-old Eliza Kauffman of Piedmont, Calif., said Barbie’s perfect appearance was downright scary. Before she tossed her collection of Barbies, she shaved their heads.

“We started giving them bad hair days,” she said, adding that she wasn’t sure where her discarded Barbies had ended up. She said she hoped that “they’re in a Dumpster.”

But Eliza is no fan of Bratz, either. She prefers Mattel’s American Girl dolls -- sales of this line were up 18% in the quarter -- which are based on 9-year-old girls who might have lived in “important times in America’s past,” as the company puts it.

“I always imagined if American Girl dolls were alive that they could be my friends,” Eliza said. “They could be one of my best friends.”

Mattel is in the midst of a Barbie restructuring. “We have recognized we’ve lost our relevance with girls,” spokeswoman Lisa Marie Bongiovanni said.

Earlier this year, it publicized Barbie’s breakup with longtime beau Ken and introduced Blaine, her new surfer boyfriend. The toy-making behemoth is also eschewing one-time models, like Jell-O Barbie, and aggressively expanding its new Worlds of Barbies line, whose dolls are marketed along with stories told through books, music and other accessories.

The Fairytopia line, a fantasy theme featuring princesses and fairies, is aimed at the youngest Barbie fans. The My Scene collection targets girls 6 to 8 with “fashion play and shopping,” according to Mattel. An “American Idol” line based on the singing competition is planned for early next year, said Robert A. Eckert, Mattel’s chairman and chief executive.

Mattel intends to improve its performance over the long term by “reinvigorating the Barbie brand and capitalizing on the positive momentum of our electronic learning strategy,” Eckert said.

Smith Barney’s Krutick said Mattel’s efforts were off to a good start: “Early indications on new Barbie lines are positive.”

A Credit Suisse First Boston note agreed: “Rumors of Barbie’s demise appear premature.”

Mattel’s other lines fared well in the quarter. Car-theme toys, including the Hot Wheels and Matchbox brands, increased 22% worldwide, fueled by new products such as Hot Wheels’ Formula Fuelers and Rev Ups.

Hot Wheels sales alone jumped 37%.

American Girl sales totaled $49.1 million. Mattel said much of the credit for the gain goes to the American Girl Place, a superstore with a restaurant and hair salon for dolls, which opened in New York in November.

As for Fisher-Price toys, which include Power Wheels, sales were $314.6 million, up 6%.

Shares of Mattel climbed 65 cents to $17.41 on the New York Stock Exchange.