Flat Toy Sales Hurt Mattel

Toy maker Mattel Inc. can’t seem to kick the Barbie blues.

The El Segundo company said Monday that net income fell 1.8% and sales were flat during the fourth quarter, in large part because of continued weakness of the company’s iconic doll.

Barbie sales in the United States fell 18% from a year earlier -- the ninth straight quarter of sagging sales for Mattel’s largest and most profitable line.

Boys’ toys also were weak, with a 7% decline in sales of Hot Wheels, Matchbox and Tyco R/C products in the fourth quarter. Entertainment-related items, including games and puzzles, fared worse, falling 13% from a year earlier.

Mattel earned $279.2 million in the quarter, or 70 cents a share, down from $284.3 million, or 69 cents, a year earlier. Revenue for the period ended Dec. 31 was essentially unchanged at $1.84 billion.

Nonetheless, because the company’s performance wasn’t as dismal as Wall Street analysts had expected, Mattel shares rose $1.02, or 6.9%, to $15.80. During the last year, the stock has traded in a range of $14.52 to $21.64.

“There are definite problems and no one is denying that, but there are also a lot of strengths,” said Sean McGowan, an analyst with Harris Nesbitt in New York. He raised his rating on the company Monday to “outperform.” “Barbie is important and very profitable, but the fact that most of these brands are very strong means that this is not just about problems, it’s about opportunities.”

Indeed, he and others noted, there were some bright spots. The American Girl line of realistic dolls and accessories grew more than 12% during the quarter. Sales of other girls’ toys, including the Disney Princesses line and the new Winx fairy dolls, grew 15% in the United States and 30% internationally.

Sales in the Fisher-Price unit grew 1% worldwide, and strong sales of Dora the Explorer toys drove the Fisher-Price Friends segment up 16%.

In a conference call with financial analysts, Mattel Chief Executive Robert Eckert said that although there had been problems with Barbie toys, the brand remained strong. The Barbie website, videos and licensed products have all performed well, he said.

“We’re in the midst of tweaking the 2006 line. We’ll make more dramatic changes for 2007,” Eckert said. “The way I view it is we’re entering the next chapter of the Barbie turnaround. We’ve got a lot of work ahead of us. It’s going to take time.”

The company in October combined Mattel brand boys’ and girls’ products with the stronger-selling Fisher-Price infant and preschool toys, and put Fisher-Price head Neil B. Friedman in charge of the division.

Mattel earned $417 million in 2005 -- including a $107-million charge related to taxes on foreign earnings -- compared with $572.7 million in 2004.

Excluding that and other charges, Mattel said, operating income for the year was $664.5 million, down 9% because of increased sales on lower-margin products and higher costs for raw material and other expenses.

Sales for the year rose 1% to $5.18 billion, despite declines in Barbie sales of 21% in the United States and 7% internationally.