Barbie looks good, but Mattel's first-quarter profit is down

Robust sales of dolls helped Mattel Inc. report an 8% sales increase for the first quarter, but higher costs at the world's No. 1 toy maker — including increased legal fees for the prolonged Bratz trial — led to a significant drop in profit.

For the three months that ended March 31, sales totaled $951.9 million, compared with $880.1 million for the same quarter a year earlier, the company said Friday. Profit fell 33% to $16.6 million, or 5 cents a share, from $24.8 million, or 7 cents.

Among its signature brands, El Segundo-based Mattel said Barbie sales increased 14%, Hot Wheels rose 6% and American Girl was up 4%. Its Fisher-Price unit was down 2%.

The first quarter is typically not noteworthy for the toy industry, which sees a drop-off in sales after the all-important holiday season. Still, Chief Executive Robert A. Eckert said the results showed consistent growth and a strong start to the year.

Fashion dolls fared especially well, with Mattel reporting that sales of its "other girls brands" were up 38%, driven by its Monster High and Disney Princess doll lines. The company's entertainment division, which includes "Cars," "Green Lantern" and "Toy Story" products, reported a 13% sales increase.

In a call with analysts, Eckert said Barbie "really led the way" last quarter and said it was the first time the brand had seen double-digit sales growth in the first quarter since 1997.

The company is embroiled in a copyright infringement and trade secrets lawsuit with rival MGA Entertainment Inc. Mattel has accused Van Nuys-based MGA of stealing the concept for the billion-dollar Bratz doll line; it contends that Bratz creator Carter Bryant, a former Barbie designer, was under its employ when he came up with the idea for the pouty, sexily dressed multiethnic dolls.

After nearly three months of testimony, a jury in federal court in Santa Ana began deliberations on the case Monday.

Eckert told analysts Friday that his goal was to "figure out and move on from this case," but he hinted that it would probably drag on beyond the jury's decision.

"Whatever plays out from the verdict will play out from the verdict," he said. "I don't know that any of us knows what exactly the next steps will be. I'm sure there will be appeals of the verdict, and that will play out."

In its earnings report, Mattel said it had spent an additional $10.7 million on legal fees for the Bratz trial and recall-related issues compared with the same quarter a year earlier. The company has not disclosed its total expenses for the trial.

Gerrick Johnson, a toy analyst at BMO Capital Markets, said that despite the drop in profit, he was encouraged by Mattel's sales growth across most of its toy lines and said the company's outlook this year seemed solid.

"It was a non-toy-related item that brought the numbers down below where they were last year," he said. "As far as the fundamental toy business goes, they looked pretty strong."

Shares of Mattel rose $1.06, or 4.1%, to $26.80.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World