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Mattel Surges Most Since 2009 as Prices Fuel Profit

Mattel Surges Most Since 2009 as Higher Prices Boost Profit
Mattel Inc.'s Hot Wheels at a Target Corp. store in Rosemont, Illinois. Photographer: Tim Boyle/Bloomberg

July 17 (Bloomberg) -- Mattel Inc., the world’s largest toymaker, surged the most in more than three years as price increases helped second-quarter profit and revenue top analysts’ estimates.

Mattel gained 9.7 percent to $34.05 at the close in New York for the largest gain since April 17, 2009. The shares of the El Segundo, California-based company have gained 23 percent this year.

The maker of Barbie and Hot Wheels brands has been raising prices to combat higher costs for raw materials and labor in Asia, where it manufacturers its toys. That’s now improving gross margin, which widened from a year earlier.

“Price increases seem to have stuck, so the gross margin outlook is encouraging,” Sean McGowan, an analyst for Needham & Co. in New York, said in a telephone interview. “Adding it up, whatever expectations were for the quarter, they blew it away.”

McGowan, who recommends buying Mattel shares, had projected a 0.3 percentage point gain in gross margin.

Gross margin, or the percentage of sales left after the cost of goods sold, expanded 3.4 percentage points to 51.3 percent from a year ago.

Net income advanced 20 percent to $96.2 million, or 28 cents a share, from $80.5 million, or 23 cents, a year earlier, Mattel said in a statement. Analysts on average had estimated 21 cents, according to data compiled by Bloomberg.

Total revenue was little changed from a year earlier at $1.16 billion, the company said. Analysts had estimated $1.13 billion.

(Mattel held a conference call on the results at 8:30 a.m. New York time. To listen, visit MAT US <EQUITY> EVT <GO>)

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

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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