Mattel Swings to Loss as Hasbro Profit Rises 56%
Helped by strong sales of “Star Wars” merchandise, toy maker Hasbro Inc. reported a 56% jump in second-quarter profit Monday while rival Mattel Inc. posted disappointing results as costs rose and its Barbie franchise continued to sputter.
It was the seventh straight quarter of sliding sales for Mattel’s largest product line. A makeover last year designed to make the blond icon more appealing to older girls hasn’t stemmed the downturn. Barbie has continued to lose market share to MGA Entertainment Inc.’s more streetwise Bratz dolls.
“They have been struggling for some time to achieve success with girls age 6 and up,” said Margaret Whitfield of New Jersey investment firm Ryan Beck & Co. Meanwhile, she said, “Bratz is trying to move in on the younger girls with Bratz Babyz.”
El Segundo-based Mattel reported a net loss of $94 million, or 23 cents a share, during the three months ended June 30, contrasted with net income of $23.5 million, or 6 cents, a year earlier. It was Mattel’s first quarterly loss in more than three years.
Sales rose 10% to $886.8 million. Sales of Barbie were down 4% worldwide and 6% in the U.S. during the quarter.
Excluding a $112.9-million charge for repatriating $2.4 billion in foreign earnings, Mattel would have earned 5 cents a share. That was 2 cents less than the consensus estimate of analysts surveyed by Thomson First Call.
Shares of Mattel fell 86 cents, or 4.4%, to $18.59.
“2005 looks to be a challenging year for Mattel,” said Robert A. Eckert, the toy maker’s chairman and chief executive, during a conference call with analysts.
And this fall looks to be equally challenging, Eckert said, as Barbie faces competition from MGA as well as Mattel’s own Dora the Explorer and Hasbro’s My Pretty Pony toys.
Still, analyst Sean McGowan of Harris Nesbitt Corp. in New York believes Barbie sales will increase in the second half of the year as Mattel rolls out dolls, helping to lift the company’s slumping bottom line.
Many of Mattel’s other brands performed well, including Hot Wheels, which posted a 4% increase in sales, rather than the 4% decline that many analysts expected. Sales of Fisher-Price toys climbed 5% and American Girl doll sales increased 20% in the quarter, on rising retail sales and gains in its American Girl Today line.
However, the products that are on the upswing don’t contribute as much profit to the bottom line as Barbie, McGowan noted.
Most troubling, analysts say, is Mattel’s struggle with rising costs. As prices for oil and transportation have increased, along with royalty payments for toy licenses, it has put more pressure on profit.
“The competitive stuff is going to be challenging,” said analyst Tim Conder of A.G. Edwards & Sons Inc. in St. Louis. “But their biggest concern is input costs.”
Eckert warned that Mattel might raise prices on its toys next year to offset these costs.
Hasbro, meanwhile, reported net income of $29.5 million, or 13 cents a share, for the quarter compared with $18.8 million, or 6 cents, a year earlier as sales of “Star Wars” merchandise and Nerf toys helped swell its bottom line. Analysts were expecting Hasbro to earn 8 cents. Revenue climbed 11% to $572.4 million.
“Star Wars: Episode III Revenge of the Sith” was released May 19, and Hasbro executives said sales of related products appeared stronger than in 1999 and 2002, when the last two “Star Wars” movies were released.
Still, analysts see that as more of a one-time increase than an upward sales trend across all of Hasbro’s lines. “Star Wars” sales are expected to decline this fall.
Shares of Pawtucket, R.I.-based Hasbro gained 8 cents to $21.56.
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Associated Press was used in compiling this report.
