Mattel quarterly earnings decline 3 percent

EL SEGUNDO, California - Mattel Inc., the largest U.S. toy maker, said Friday its fiscal third-quarter profit declined 3 percent as the tough economy dampened demand for key brands like Barbie and Fisher-Price.

Chief Executive Robert A. Eckert said Friday that revenue "continues to be challenging this year" because of the economy, stronger dollar and a lack of toys tied to hot movies and other entertainment.

A year ago, results were boosted by toys tied to movies including "Kung Fu Panda," "Speed Racer" and "The Dark Knight."

The company said it has continued to cut costs to maintain profit margins. In response to weak sales and cautious ordering by retailers, toy makers have been cutting costs and slashing inventory in an effort to preserve profit.

Mattel, which is based in El Segundo, Calif., is in the midst of a cost-cutting plan designed to save $180 million to $200 million over two years.

Profit for the quarter ended Sept. 30 declined to $229.8 million, or 63 cents per share, matching analyst expectations. A year ago the company earned $238.1 million, or 65 cents per share.

Revenue declined 8 percent to $1.79 billion, partly because of the stronger dollar. Analysts polled by Thomson Reuters, on average, predicted revenue of $1.78 billion.

Sales of Barbie, which celebrated her 50th birthday earlier this year, declined 8 percent as flat sales domestically were offset by international declines. Sales of other girl brands dropped 19 percent as demand for Polly Pocket and High School Musical toys waned.

Fisher-Price toy sales slipped 6 percent. Sales of Hot Wheels fared better, rising 9 percent, as did sales of American Girl toys, which rose 4 percent.

As the crucial holiday season approaches, large retailers such as Wal-Mart Stores Inc. and Target Corp. have cut prices on toys early, leading to fears of a promotional holiday. Wal-Mart is offering 100 toys under $10 compared with a 10 toys for $10 last year, for example.

But Wachovia analyst Tim Conder said Mattel's indication that retailers are tightly managing inventory is a positive sign and "implies no inventory issues in the channel or at company level."

In addition, price increases introduced earlier in the year appear to be holding, which should help results, Conder said.

He reiterated his "Outperform" rating on Mattel's stock and said new properties and cost savings should boost revenue in upcoming years.

Mattel's chief rival, Hasbro Inc., reports third-quarter results on Monday.

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