July 21 (Bloomberg) -- Hasbro Inc., the maker of Monopoly and Transformers, fell 1.7 percent in New York trading after the toymaker said it will raise prices for a second time this year to counter higher costs to make action figures.

Second-quarter profit jumped almost eightfold following costs a year earlier to end part of a contract with ``Star Wars'' director George Lucas, Hasbro said today. The world's second-largest toymaker said a ``mid-single-digit'' price increase on a percentage basis will go into effect Sept. 1.

Sales exceeded analysts' estimates as consumers bought toys tied to May's ``Indiana Jones'' movie and next month's animated ``Star Wars'' film. Both Hasbro and Mattel Inc., which makes Batman products, may need a superhero-driven surge at the box office and price increases to help combat higher plastic and shipping costs in the midst of a consumer-spending slowdown.

``Some investors are a little spooked by the acknowledgement that cost pressures are affecting them,'' Chris White, an analyst at Wedbush Morgan Securities in Los Angeles, said in a telephone interview. ``It may get worse before it gets better.'' He recommends holding the shares and doesn't own any.

Hasbro, which rose 49 percent this year before today, dropped 64 cents to $37.35 at 4:01 p.m. in New York Stock Exchange composite trading.

Second-quarter net income soared to $37.5 million, or 25 cents a share, compared with $4.8 million, or 3 cents, a year earlier. Sales climbed 13 percent to $784.3 million, Pawtucket, Rhode Island-based Hasbro said today in a statement.

Analysts' Estimates

Ten analysts surveyed by Bloomberg estimated average profit of 22 cents a share. Eight predicted Hasbro would report sales of $675.9 million.

Operating margin, or sales minus the cost of goods sold and selling, general and administrative expenses, was 8.35 percent. Timothy Conder, an analyst at Wachovia Capital Markets LLC in St. Louis, estimated 8.9 percent. Hasbro had higher royalty costs for ``Star Wars'' and ``Iron Man'' products and invested in distribution in emerging markets like Russia, Conder said.

Some investors are wondering why more didn't flow down to earnings per share since the company's sales beat analysts' estimates, Conder said in an interview. He recommends buying Hasbro shares.

U.S. and Canadian sales advanced 11 percent at Hasbro to $467.7 million. Overseas revenue gained 15 percent to $293.7 million, 9 percentage points of which came from currency changes.

Digital Games

Boys' toy sales climbed 13 percent on ``Star Wars,'' ``Indiana Jones'' and ``Iron Man.'' Toy purchases based on Spider-Man and ``Iron Man'' are part of a five-year licensing agreement with Marvel Entertainment Inc. Sales tied to last year's ``Transformers'' film fell during the quarter, Hasbro said.

Girls' toys including Littlest Pet Shop and My Little Pony gained 24 percent. Playskool preschool toys also rose 24 percent, Nerf sports toys 29 percent and games including Trivial Pursuit and Twister 12 percent.

Last year, the toymaker signed a license with Electronic Arts Inc. to make video, cell-phone and other digital games for brands such as Monopoly, Battleship and Scrabble.

Brian Goldner, the former operating chief, took over as chief executive officer in May when Alfred Verrecchia, a 43-year Hasbro veteran, stepped down and became chairman.

Mitigating Costs

Chief Financial Officer David Hargreaves said during a conference call with investors that with ``a combination of cost-saving initiatives and pricing actions, thus far we have been able to mitigate'' most of the higher manufacturing costs.

``We are taking a second round of pricing which we really hadn't envisioned in February,'' said Hargreaves. Hasbro's customers ``obviously don't like it, but they recognize that their own costs are going up.''

Mattel, the maker of Barbie dolls and Hot Wheels cars, reported second-quarter profit on July 18 that fell less than analysts estimated on sales of Batman toys. The toymaker said last week it implemented ``mid-to-high-single digit'' price increases on a percentage basis on June 1.

Net income declined 48 percent to $11.8 million, or 3 cents a share, as legal expenses rose. ``The Dark Knight,'' the newest Batman film, took in a record $155.3 million domestically over the weekend.

A day earlier, Mattel won a jury verdict against MGA Entertainment Inc. over the origin of the Bratz dolls.

To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net.

Last Updated: July 21, 2008 16:12 EDT