Mattel Profit Down 28% as Barbie Sales Decline
Maybe Barbie’s makeover wasn’t extreme enough.
Mattel Inc. said Friday that falling sales of its signature doll contributed to a 28% drop in first-quarter profit. The company’s stock slid 8%.
The world’s largest toy company said it earned $6.5 million, or 2 cents a share, in the three months ended March 31, missing analysts’ estimates by a penny. El Segundo-based Mattel earned $9 million, or 2 cents, in the same period last year.
Sales in the 2005 quarter were flat at $783.1 million, compared with $780.9 million last year, which included a benefit from changes in currency exchange rates. Worldwide sales of Barbie were down 15%.
“Following last year’s encouraging holiday season, our early 2005 results were disappointing,” said Mattel Chief Executive Robert A. Eckert in a statement.
Sales of Barbie have been slipping for six straight quarters, and Eckert’s attempt to dress her up in trendier outfits doesn’t appear to have resonated with buyers. A top seller in the fashion doll industry is now MGA Entertainment Inc.’s hip-hop-styled Bratz line, which appeals to many girls who believe they are too old for Barbie.
“They’ve just got to get some excitement back into” Barbie, said Peter Goldman, a money manager at Chicago Asset Management, which owns Mattel shares. “Bratz pretty much cleaned their clock.”
Mattel Chief Financial Officer Kevin Farr acknowledged in a conference call that “our overall performance at retail is still below our expectations” and said the company remained focused on turning around the Barbie brand. Recent offerings include a $20 “American Idol” Barbie based on the Fox television show and Barbie as Catwoman, with a removable cat mask and whip.
The year will continue to be tough for Mattel, predicted analyst Gary Cooper of Banc of America Securities Equity Research. In a report to clients, he wrote, “Higher commodity (resin, paper) and transportation costs will likely continue to pressure margins, while disappointing Barbie sales will certainly provide little or no room for upside.”
Also threatening Mattel’s bottom line is the rising cost of oil, which drove up manufacturing and production costs last quarter, CEO Eckert said.
“We don’t want to go up and down with gyrations in the petroleum market,” Eckert said.
Also lagging behind were sales of some of Mattel’s other signature brands, including Hot Wheels, Matchbox and Tyco R/C radio-controlled vehicles, which fell 5%. Worldwide gross sales for Mattel’s Fisher-Price Brands business unit were flat at $264.4 million.
On the bright side, sales at Mattel’s American Girl Brands unit rose 25% to $67.6 million, driven by the January launch of a new American Girl Today doll and continued strong performance of the American Girl retail stores. In addition, its Dora the Explorer doll did well globally.
Also, strong sales of boy-oriented toys such as Robots, Batman and Megaman helped drive the company’s entertainment business -- which includes games and puzzles -- up 18%.
Shares of Mattel slipped $1.56 to $18.67 on the New York Stock Exchange. The stock is down 4.2% this year.
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Bloomberg News was used in compiling this report.
