Mattel profit slumps as costs rise, Barbie's appeal fades

Wed Jul 17, 2013 10:47am EDT
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By Chris Peters

(Reuters) - Mattel Inc (MAT.O: Quote), the world's largest toymaker, reported a far weaker-than-expected 23 percent drop in profit as costs rose and Barbie sales fell for the fourth straight quarter.

Sales of Barbie dolls, long the company's mainstay, fell 12 percent to highlight the iconic brand's struggle to stay relevant even against Mattel's own American Girl and Monster High dolls.

Mattel shares fell more than 7 percent in early trading, while those of smaller rival Hasbro dropped 3 percent.

Total costs rose 9 percent to $505 million in the second quarter as the company geared up for the second half of the year, when it gets about two-thirds of its sales.

Mattel, which also makes Hot Wheels cars and Fisher-Price baby toys, had said it expected spending to be higher this year than last year as it invests in new franchises, emerging markets and American Girl stores.

But sales rose just 1 percent to $1.17 billion, missing the average analyst estimate of $1.22 billion.

Toy sales in mature markets such as the United States and Europe have been weak so far this year, but Mattel has fared better than its competitors thanks to the popularity of its American Girl and Monster High dolls.

"Numbers were weaker. It wasn't just one line, it was everything. It was not just Barbie, it was Hot Wheels, it was entertainment, it was some element of Fischer-Price," BMO Capital Markets analyst Gerrick Johnson said.   Continued...

The logo of Mattel is seen outside the company's corporate headquarters in El Segundo, California July 17, 2008. REUTERS/Mario Anzuoni