Mattel reports surprise profit in 1st quarter as sales of Barbie and other toys increase

Barbie, Thomas and Friends drive Mattel 1Q profit

NEW YORK — Much like the characters in the “Toy Story” movies, sales of a broad array of Mattel toys burst to life in the first quarter.

Mattel Inc. got a boost from new toy lines like Thomas and Friends and World Wrestling Entertainment, and such standbys as Barbie also performed well, leading the toy maker to post a surprise profit.

The strong results point to the fact that toy sales — which held up better than those of many other products during the recession — are recovering more quickly as well.

“Toys always hold up better than other segments within retail, and retail activity in general seems to have improved,” said Sterne, Agee & Leach analyst Margaret Whitfield. “There’s a sense that consumers are coming out of hiding.”

The No. 1 U.S. toy maker also has a strong lineup this year compared with previous years, Whitfield said.

Mattel’s classic brands performed well. Barbie sales rose 5 percent — the second straight quarterly increase for the 50-year-old fashion icon after nearly two years of decline. Drivers included the career-themed “I Can Be” line, the Barbie Basic “Little Black Dress” line and a spring Barbie that comes with a mermaid tail.

Sales of Hot Wheels rose 9 percent.

Mattel’s newly licensed toy lines showed strength as well. WWE and “Toy Story” helped sales in Mattel’s entertainment division rise 35 percent. The “Toy Story 3″ movie is set to open during the summer, and that’s likely to get shoppers buying.

Fisher Price sales rose 5 percent, helped by the Thomas and Friends line, and American Girl sales rose 6 percent.

Overall, Mattel, the No. 1 U.S. toy maker, earned $24.8 million, or 7 cents per share, for the three months ended Mach 31. That compares with a loss of $51 million, or 14 cents per share, a year earlier. Analysts polled by Thomson Reuters, on average, had expected a loss of 3 cents per share.

Revenue rose 12 percent to $880.1 million. That was well above the $859.9 million analysts predicted.

CEO Bob Eckert said he expects the new toy lines to remain strong.

“We expect them to perform more akin to evergreen toy brands rather than one-hit wonders,” he said.

The sales growth, significantly better than the company’s 1 percent revenue increase in the fourth quarter, may indicate that shoppers are beginning to spend money again on nonessentials and becoming more confident in the economy recovery.

On Wednesday the Commerce Department said March retail sales rose 1.6 percent, up from 0.5 percent in February. That was better than most economists had predicted.

Still, after spending a year slashing inventory during the consumer spending cutback that began in late 2008, many retailers remain cautious and are buying what they need rather than building up inventory, Eckert said.

“In essence, retailers bought what they sold this year,” Eckert said. “We’re still seeing inventories a bit below the prior year, and I’ve seen some studies that suggest broadly and that is not just toys and not just in the U.S.”

Mattel said in the second half of the year, it expects higher costs for commodities like oil and minimum wage pressure in China, but said it will raise prices if it needs to.

Mattel, based in El Segundo, Calif., also cut costs during the quarter, lowering other selling and administrative expenses to $292.5 million from $317 million.

In the past year Mattel has cut jobs, improved its supply chain, reduced the number of items in development and slashed capital spending to offset sluggish sales as part of a plan to save $180 million to $200 million in 2010.

Rival Hasbro Inc. will report its quarterly results Monday.

Shares rose 9 cents to close at $23.84 Friday, after briefly touching a 52-week high of $24.60.

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AP Business Writer Michelle Chapman contributed to this report from New York.