Bratz lawsuit takes toll on Mattel profit

AP News
Posted: Apr 15, 2011 11:25 AM
Bratz lawsuit takes toll on Mattel profit

Sales of Barbie helped Mattel Inc.'s revenue rise 8 percent during the first quarter. But higher costs for its lawsuit over the Bratz dolls and other expenses sent net income down 33 percent.

Still, results for the quarter, which is a small one for toy makers because it follows the crucial holiday quarter, were higher than analysts expected. Shares rose 5 percent to a 52-week high in morning trading.

"The first quarter is a bit like spring training, and for a business like ours, what is key in the early part of the year is preparing the business for the year ahead," said CEO Bob Eckert.

Mattel, the largest U.S. toymaker, is gearing up for a heavy movie tie-in summer, with toy lines tied into Disney/Pixar's "Cars 2" due out June 24 and "Green Lantern," Warner Brothers' new superhero franchise out June 17.

Expectations are particularly high for "Cars 2" because the "Cars" line has been a strong seller for Mattel despite having no new movie since the original in 2006.

"Cars 2" action figures and new track sets are expected to be on toy shelves in mid-May.

In the first quarter, net income fell to $16.6 million, or 5 cents per share, from $24.8 million, or 7 cents per share, last year. Analysts expected earnings of 4 cents per share, according to FactSet.

Revenue rose 8 percent to $951.9 million from $880.1 million. That beat analyst predictions of $905.1 million. Sales rose 7 percent in the U.S. and 10 percent internationally.

Barbie remained a bright spot for Mattel, with revenue up 14 percent during the quarter, the iconic doll's sixth consecutive quarter of sales growth.

Dolls in general did well, with Monster High, Disney Princesses and American Girl all gaining.

Hot Wheels rose 6 percent. Fisher-Price revenue fell 2 percent after Mattel's license to make Sesame Street toys ended at the end of last year and competitor Hasbro picked it up.

Higher revenue was offset by higher expenses, however, including $18.2 million in costs related to the latest lawsuit in its six-year legal battle with Bratz maker MGA.

A jury is currently deliberating on a federal copyright infringement and trade secrets lawsuit against MGA, related to rightful ownership of the pouty-lipped Bratz dolls. MGA has countersued.

Toy makers are facing higher costs for commodities such as resin and rising fuel prices. Mattel raised its prices on April 1 in the high single-digit percentage range to offset higher costs. Eckert said retailers have been "reasonable" about the increase.

Separately, the El Segundo, Calif.-based company issued a quarterly dividend of 23 cents, payable on June 17 to shareholders of record as of May 25.

On Thursday, Mattel's chief rival Hasbro Inc. said its first-quarter net income fell 71 percent while revenue was nearly flat at $672 million.

Shares rose $1.39, or 5.4 percent, to $27.13 in morning trading. The stock has traded between $20.14 and $26.70 during the past year.