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Mattel Declines Most in 17 Months as Profit Misses

Net income rose to $51.6 million
Mattel Inc chief executive officer Robert Eckert. Photographer: Diane Bondareff/Fisher-Price via Bloomberg

July 16 (Bloomberg) -- Mattel Inc., the world’s largest toymaker, fell the most in 17 months after fees from a lawsuit and higher personnel costs increased expenses in the second quarter and profit trailed analysts’ estimates.

Mattel dropped $2.19, or 9.5 percent, to $20.81 at 4:15 p.m. in Nasdaq Stock Market trading, the largest decline since February 2009. The stock has advanced 4.2 percent this year.

“Increased SG&A expenses didn’t allow the strength of top line to reach the bottom line,” said Robert Carroll, an analyst for UBS Securities in New York, who recommends buying Mattel shares.

Mattel’s second-quarter net income rose to $51.6 million, or 14 cents a share, from $21.5 million, or 6 cents, a year ago, the El Segundo, California-based company said today in a statement. That compared with the 15-cent average of analysts’ estimates compiled by Bloomberg.

Fees related to the toymaker’s lawsuit with MGA Entertainment Inc. and incentive and severance pay increased administration expenses by $34.5 million.

The toymaker’s sales rebounded along with consumer spending as purchases at U.S. retailers from April to June climbed 6.8 percent from a year ago, according to the Commerce Department. Revenue in the quarter ended June 30 increased 13 percent to $1.02 billion from $898.2 million, boosted by a 17 percent gain in the U.S.

‘Toy Story’ License

Mattel Chief Executive Officer Bob Eckert acquired the “Toy Story” license in 2008 and released a line of products last year. The third installment has become the highest grossing in the U.S. this year since its release a month ago.

Revenue from the entertainment unit, which includes “Toy Story,” soared 60 percent from a year ago when the company lacked a product line tied to a summer blockbuster film. Stifel Nicolaus & Co. analyst Drew Crum raised his estimate for revenue from the “Toy Story” line to $300 million last week.

The toymaker expects retailers that sell its products to keep inventories tight through the holiday season, Eckert said.

“I don’t think anybody thinks we are back to good growth in the macro economy,” Eckert said on a conference call with analysts. “I don’t think anybody is building inventories in anticipation of renewed consumer spending.”

(Mattel held a conference call at 8:30 a.m. New York time. To listen, visit {MAT US <Equity> EVT <GO>})

To contact the reporters on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.

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