Mattel profit falls 53%, sales slip 2%
Toy giant Mattel Inc.reported a 53% decline in profit in the first quarter, sending its stock down more than 9%, after higher production costs, slower sales of Barbie and Hot Wheels and a recent acquisition affected its bottom line.
For the three months ended March 31, sales totaled $928.4 million, down 2% compared with $951.9 million in the same quarter last year, the company said Monday. Profit dropped to $7.8 million, or 2 cents a share, from $16.6 million, or 5 cents. The results fell below analyst expectations of a profit of 7 cents a share.
El Segundo-based Mattel said results were affected by the $680-million acquisition of HIT Entertainment, the toy firm behind such preschool favorites as Thomas the Tank Engine and Barney. Setting aside integration and acquisition expenses, the company said it would have reported a profit of 6 cents a share.
The first quarter is usually a slow season for the toy industry, which sees a drop-off in sales after the holiday season. Chief Executive Bryan Stockton, who recently took the helm from Robert Eckert, said the company remained optimistic about the rest of the year.
“We consider the first quarter to be spring training for the toy industry,” Stockton said during a Monday call with analysts. “We continue to have momentum in many key areas, and we’re focused on improving our performance in a couple of areas like North America andFisher-Price.”
Among its signature brands, Mattel said that Barbie sales fell 6%, Hot Wheels sales dropped 5% andFisher-Pricesales were flat.
Jason Moser, a research analyst at the Motley Fool, a financial services company, said Mattel’s retail customers such as Wal-Mart, Target and Toys R Us were scaling back their toy orders in reaction to tighter consumer spending. Profit margins were also squeezed by rising material and overseas labor costs, Moser said, although Mattel passed along much of the costs to consumers.
“Seasonally, this is always the worst quarter of the year,” Moser said. “They are dealing with the normal cyclical nature of the season and the tricky consumer environment, but they had a great holiday and the long-term picture of this company is good.”
Shares of Mattel fell $3.12, or 9.1%, to $31.01 in trading Monday.
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