Mattel profits fall on cost of HIT acquisition

City A.M. Reporter
MATTEL yesterday reported weaker-than-expected quarterly results as the world’s largest toymaker struggled to convince shoppers to buy Barbie dolls at higher prices and retailers cut back on inventory.

Mattel shares, which have gained more than 22 per cent since the beginning of this year, fell as much as 10 per cent yesterday to $30.59, their lowest in two months.

Toymakers have been forced to offer discounts to lure customers but Mattel increased prices this year to combat rising costs for materials and higher wages in China, where most toymakers assemble their products.

Mattel benefitted last year from strong sales of toys based on Cars movies driven by the release of the second film in Pixar’s popular animated series, but sales slowed down this year.

Worldwide sales for the entertainment segment, which includes Cars 2 toys and other games, fell 17 per cent.

The price increases helped lift the company’s gross margins to 51 per cent for the first quarter. Sales fell two per cent to $928.4m. Sales of Barbie dolls fell six per cent, while those of Hot Wheels were down five per cent.

The company, also home to brands such as Fisher-Price toys and American Girl, said its net income fell to $7.8m, from $16.6m a year earlier. The toymaker bought HIT Entertainment for $680m in an all-cash deal to own intellectual property and marketing rights for pre-school toy brands such as Thomas and Friends.