‘Cars’ and Dolls Drive Up Profit at Mattel

Times Staff Writer

This year’s Tickle Me Elmo laughing plush toy is giggling his way into parents’ wallets. Toys from this year’s animated movie “Cars” are practically driving off the shelves. Even the sagging Barbie brand is showing new signs of life.

The El Segundo-based toy maker Monday reported its best quarterly earnings in six years. Analysts called the news a promising sign for holiday sales, for Mattel and the $22-billion U.S. toy industry.

“The story is playing out pretty much the way it’s supposed to: Barbie building momentum while the rest of the business is doing very well,” said Gerrick Johnson, an analyst with BMO Capital Markets in New York. “The whole industry is looking a lot more upbeat this year than it has in years past.”

T.M.X. Elmo, the $40 “extreme” version of the original quaking, giggling doll that debuted 10 years ago, already has sold out at many major retailers. It is expected to be one of the hottest items with holiday shoppers.


Mattel said it was working to replenish retail supplies of the toy, which when “tickled” rolls onto the floor in a fit of laughter, then stands back up again.

The company said Monday that third-quarter net income increased 6% to $239 million, up from $225.3 million a year earlier. Revenue in the quarter expanded 7% to $1.79 billion from $1.67 billion.

Mattel reported gains almost across the board. The biggest surprise came from Barbie, which is still the nation’s No. 1 fashion doll but has lost market share in recent years to the provocatively clad Bratz dolls from Van Nuys-based MGA Entertainment Inc.

The company said sales of Barbie were up 1% worldwide -- the first increase in three years -- and grew 4% in the United States, the third consecutive quarter of domestic growth.

Along with a strong showing from palm-size Polly Pocket, Barbie helped propel sales of Mattel’s boys and girls toys 8% worldwide.

“You have a product that has declined as much as Barbie has, it takes more than a few percentage points to say it’s back, but this is how turnarounds begin,” said Sean McGowan of Wedbush Morgan Securities in New York.

“I’m not saying everything is perfect, but it’s hard to look at this quarter and not say everything is good.”

In McGowan’s estimation, the company’s third-quarter performance was the best since 2000, based on the gains in each Mattel division along with gross margin improvements and the growth of Barbie sales at home and abroad.


“I think this is going to be the best holiday season the toy industry has seen in five years, and for Mattel, maybe even longer than five years,” McGowan said.

Shares of Mattel rose 60 cents, or almost 3%, to close at $21.30.

Sales of Fisher-Price infant and preschool products were up 9%, driven in large part by T.M.X. Elmo and Dora the Explorer. Revenue at the company’s entertainment division were driven up 27%, primarily by toys tied to the movie “Cars” from Pixar Animation Studios.

The only disappointing parts of Mattel’s business in the third quarter, the American Girl and Wheels units, weren’t enough to put a drag on the business.


“True, the holiday season has just begun,” Mattel Chief Executive Robert Eckert said on a conference call with analysts Monday, “but so far, it’s a good beginning.”