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Mattel Post Loss on Higher Product, Legal Costs

Mattel, the world's largest toymaker, said Monday that higher product costs and legal fees led to a loss for the first quarter, results that fell short of Wall Street expectations.

Shares fell 7 percent, or $1.52, to $20.26 at the open of trade.

Dancing Princess Barbie dolls are displayed at a ToysRus in Monrovia, Calif., Monday, Jan. 29, 2007. Mattel Inc., the world's largest toymaker, said Monday its fourth quarter profit rose 3 percent boosted by strong sales of its Barbie and Fisher-price toys, including the popular T.M.X. Elmo doll. (AP Photo/Nick Ut)
Nick Ut
Dancing Princess Barbie dolls are displayed at a ToysRus in Monrovia, Calif., Monday, Jan. 29, 2007. Mattel Inc., the world's largest toymaker, said Monday its fourth quarter profit rose 3 percent boosted by strong sales of its Barbie and Fisher-price toys, including the popular T.M.X. Elmo doll. (AP Photo/Nick Ut)

The El Segundo, Calif.-based maker of Barbie dolls, Fisher-Price toys and Matchbox cars reported a loss of $46.6 million, or 13 cents per share, compared with last year's quarterly profit of $12 million, or 3 cents per share.

Sales fell 2 percent to $919.3 million from $940.3 million in the year-ago period, despite the benefits of a weak dollar helps boost sales overseas.

Analysts surveyed by Thomson Financial had expected profit of a penny per share on sales of $926.6 million.

"Results were not completely surprising compared to last year's strong first quarter, which benefited from depleted retail inventories and hot properties such as T.M.X. Elmo and CARS," said Robert A. Eckert, chairman and chief executive.

"Although the first quarter was impacted by higher product costs and legal fees, we expect price increases effective in June to aid profitability in the latter half of the year."

Chief financial officer Kevin Farr told analysts a decline in profit margins was caused by "cost pressures from commodities, Chinese labor rates, the appreciating Chinese currency, and incremental product testing costs."

Mattel said global sales in its Fisher-Price unit fell 13 percent to $341.3 million, mainly due to declines in sales of Fisher-Price Friends products. Worldwide sales for the Barbie brand were flat, as higher international sales offset declines in the U.S.

Sales of the company's Hot Wheels, Matchbox and Tyco R/C brands gained 15 percent, led by the popular new Speed Racer toy line.

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