Toymaker Mattel Inc on Thursday posted a surprise profit in its first full quarter under new chief executive Christopher Sinclair, helped by a rise in demand for its Fisher-Price toys and lower costs. Sales of Fisher-Price toys, aimed at infants and preschoolers, rose 9 percent in the second quarter, accounting for a third of total sales. Fisher-Price sales had fallen 17 percent in the same period a year earlier.
Mattel is in the middle of a turnaround as its Barbie dolls have fallen out of favour with young girls, who are increasingly turning to interactive electronic toys and tablets. Sinclair is working to streamline the toymaker's brand portfolio and has increased spending on advertising and made marketing efforts more effective, which has worked in Mattel's favour, B. Riley analyst Linda Bolton Weiser said.
Gross margin improved to 47.9 percent in the second quarter ended June 30 as costs fell 10 percent. Mattel is on track to achieve the high end of its cost-cut target range of $250 million to $300 million by end of next year, CFO Kevin Farr said on a post-earnings call. The company also said it had renewed its partnership with Walt Disney Co for the Toy Story films, gaining global rights for toys based on the fourth instalment of the franchise due in 2017.
Barbie sales, however, continued to disappoint, falling 11 percent to $130.3 million. Mattel is making progress with Barbie, but getting sales back on track will take time, President Richard Dickson said. The company said earlier this year that it would refresh its line of Barbies in 2016. It also announced plans for a fall launch of the first-ever line of superhero action figures for girls, featuring characters such as Superwoman and Wonder Woman. Mattel is also banking on the hype surrounding next year's Batman vs. Superman movie for a spike in toys based on DC Comics characters.
The company reported a quarterly net loss of $11.4 million, or 3 cents per share, compared with a profit of $28.3 million, or 8 cents per share, a year earlier. Excluding items, it earned 1 cent per share, beating the average analyst estimate of a loss of 4 cents. Net sales fell 7 percent to $988.2 million, below expectations of $995.4 million. Mattel's shares closed at $25.15 on Thursday, having fallen 18.7 percent this year. The stock was up marginally in extended trading.