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Mattel Profit Slumps On Acquisition Costs, Barbie Sales Drop

Mattel Profit Slumps On Acquisition Costs, Barbie Sales Drop
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Toy maker Mattel Inc. (MAT: Quote) reported Monday a 53 percent drop in first-quarter profit, as sales in its core brands Barbie and Hot Wheels declined 6 and 5 percent, respectively. The results were also affected by costs related to the acquisition of UK-based media firm Hit Entertainment. Both earnings per share and revenues missed analysts' expectations, sending the company's shares down by 5 percent pre-market.

It was in October last year that Mattel agreed to acquire 'Thomas & Friends' brand owner Hit Entertainment from a consortium led by private equity firm Apax Partners funds in an all-cash deal of about $680 million. The recent-quarter earnings included $0.04 per share in costs associated with acquisition and integration of Hit.

Mattel's first-quarter net income more than halved to $7.8 million or $0.02 per share from $16.6 million or $0.05 per share reported in the previous year. On average, 14 analysts polled by Thomson Reuters expected earnings of $0.07 per share. Analysts' estimates typically exclude one-time items.

Net sales for the quarter declined 2 percent to $928.4 million from $951.9 million a year earlier, missing analysts' estimate of $988.62 million. Sales results included an unfavorable change in currency exchange rates of 1 percentage point.

Segment-wise, sales for the Mattel Girls & Boys Brands business unit declined 4 percent. Barbie brand gross sales declined 6 percent, while sales increased 22 percent for Other Girls Brands.

Worldwide gross sales for the Wheels category, which includes the Hot Wheels, Matchbox, and Tyco R/C brands, were down 6 percent from a year ago. Entertainment business gross sales dropped 17 percent.

Despite sales declines in its core brands, the company's CEO Bryan Stockton said, "We gained overall NPD toy category share across the U.S. and in Europe, with Barbie and Hot Wheels gaining share in both regions and we continue to experience strong growth internationally and with American Girl."

On a regional basis, gross sales decreased 9 percent in North America, while international gross sales increased 7 percent from a year ago despite unfavorable changes in currency exchange rates.

Gross sales for Fisher-Price Brands were $310.2 million, flat with the prior year and American Girl Brands generated sales of $76 million, up 4 percent from the preceding year.

The board also declared a second-quarter cash dividend of $0.31 per share, reflecting an annualized dividend of $1.24 per share, which represents a 35 percent increase to last year's total dividends. The quarterly dividend will be payable on June 15, 2012 to stockholders of record on May 23.

MAT closed Friday's regular trading at $34.13 on the Nasdaq. In pre-market trading Monday, the shares dropped 5.54 percent to $32.24.

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by RTT Staff Writer

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