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(Reuters) - Mattel Inc (MAT.O), 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.
The company said second-quarter net income fell to $73.3 million, or 21 cents per share, from $96.2 million, or 28 cents per share, a year earlier.
Analysts on average were expecting earnings of 32 cents per share, according to Thomson Reuters I/B/E/S.
The company does not break out Barbie sales numbers, but they account for a significant part of the sales of the Mattel Girls & Boys Brands unit.
Sales at the unit rose 1 percent to $792.4 million during the quarter, helped by Monster High dolls and accessories. These dolls depict "descendants" of horror story characters such as Dracula and Frankenstein.
While Barbie sales dropped, sales of American Girl dolls, which the company sells through its stores of the same name, rose 14 percent to $78.2 million.
"Our girls portfolio continues to be the engine that's fueling our global growth," CEO Bryan Stockton said about the unit that generates about 40 percent of the company's revenues.
Sales of toy cars, including the Hot Wheels and Matchbox brands, fell 6 percent, while sales of Fisher-Price fell 3 percent.
Still Wells Fargo analyst Timothy Conder said Mattel's retail share gains appeared to have continued in the United States and five key European markets.
Apart from general expenses, Mattel took a $14 million charge related to its Polly Pocket girls dolls brand.
The company also increased its share repurchase program by $500 million.
Mattel shares, which have risen 26 percent this year, fell 6 percent to $43.44 in early trading on the Nasdaq. Shares of Hasbro, which is due to report its results on July 22, fell 2 percent to $46.12.
Reporting by Dhanya Skariachan in New York & Chris Peters in Bangalore; Editing by Saumyadeb Chakrabarty