Brisk Mattel sales offset recall costs

Mattel Inc. posted a 15% gain in fourth-quarter profit Thursday, even though it entered the crucial holiday season in the shadow of negative publicity over its recalls of millions of Chinese-made toys tainted with lead.

The company said that tax gains and strong international sales of Hot Wheels and other toys helped offset the cost of the recalls. Still, the world’s largest toy maker warned that it expected to rack up additional costs in 2008 as a result of the recalls.

“We have a lot of litigation around the world on things related to product recalls, and we’ve got a significant case coming to trial this year,” Robert A. Eckert, Mattel’s chairman and chief executive, said during a conference call with Wall Street analysts.

Mattel began recalling toys last August because of concerns that lead paint levels might exceed U.S. safety standards.

The El Segundo-based company reported that its net income grew to $328.5 million, or 89 cents a share, in the October to December period from $286.4 million, or 75 cents, a year earlier.

The latest period included charges of about $42 million related to the company’s recalls of the tainted toys, and tax benefits of $47.3 million.

Sales rose 4% to $2.19 billion, with the increase attributable to the weaker dollar’s positive effect on international sales.

Analysts surveyed by Thomson Financial expected earnings per share of 73 cents on sales of $2.13 billion.

The company also approved an additional $500 million stock buyback. Mattel shares rose $2.07, or 10.9%, to $21.01.