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American Girl Powers Mattel Growth as Barbie Loses Sheen

*from www.reuters.com, April 17, 2013 (To view original article click here.)

Take Away #1: American Girls dolls boost sales to pre-teen girls.

Key Facts and Figures:

  • The No.1 toymaker reported that sales of American Girl dolls and accessories rose by a third to just over $100 million in the first quarter.
  • The rise in sales helped Mattel turn in stronger-than-expected earnings and boosted its shares to near a 15-year high.
  • Overall sales rose 7%, also beating market expectations.

Take Away #2: Mattel’s Monster High dolls also helped boost sales.

Key Facts and Figures:

  • Mattel said that sales were also driven by demand for “Monster High,” dolls depicting the “descendants” of famous horror story characters.
  • Monster High dolls appeared on many hot toys lists in 2012.
  • Analysts such as Sean McGowen with Needham have tied some of the weakness in the Barbie brand to the rising popularity of other Mattel dolls such as Monster High.

Take Away #3: Mattel’s iconic Barbie franchise shows signs of aging.

Key Facts and Figures:

  • Sales of Mattel’s flagship Barbie dolls were essentially flat in the quarter, after taking currency fluctuations into account.

Take Away #4: Mattel’s American Girl segment soars, topping analyst estimates.

Key Facts and Figures:

  • “The American Girl segment provided the biggest surprise of the quarter,” MKM partners analyst Eric Handler said in a research note.
  • Handler had expected the American Girl business – which contributed to 10% of total revenue – to show revenue growth of 6% instead of the 32% Mattel reported.
  • Mattel sells its American Girl toys in its own stores, while most of its other brands sell through retailers like Wal-Mart, Target, or Toy R Us.
  • The American Girl line was introduced in 1986 by a company bought by Mattel in 1998.

Take Away #5: Mattel also managed to raise prices globally and cut costs by starting to make products for local consumption in countries like Brazil and India.

Key Facts and Figures:

  • Local production helps the company get its products to stores more quickly and cuts down on import duties and shipping costs.
  • Mattel said selling, general and administrative (SG&A) costs as a percentage of net sales fell by 30 basis points to 37.1% in the first quarter.

Take Away #6: For the full year, however, the company forecast SG&A spending to be higher than last year.

Key Facts and Figures:

  • Expenses for the year include investments in new franchises, emerging markets and additional American Girl stores.
  • The company also expects higher employee and benefit costs in the year, CFO Kevin Farr said on a post-earnings call with analysts.
  • Farr said he expects gross margins in the low-to-mid 50% range for the full year.
  • Mattel reported first-quarter gross margins of 54.2%.

Take Away #7: Profits soar as net income rose, beating analysts’ estimates.

Key Facts and Figures:

  • Net income rose to $38.5 million, or 11 cents per share, in the first quarter from $7.8 million, or 2 cents per share, a year earlier.
  • Analysts on average were expecting a profit of 9 cents per share, according to Thomson Reuters I/B/E/S.
  • Smaller rival Hasbro Inc. is due to report quarterly results next week.

Take Away #8: Mattel’s sales rose 7% to $995.6 million, beating the average analyst estimate of $986.5 million.

Key Facts and Figures:

  • Sales of Fisher-Price brand toys fell 7%.
  • The first quarter is typically the least significant of the year in terms of sales for toy companies.
  • Toy companies usually make more than a third of their annual revenue in the fourth quarter, which includes the all-important holiday selling season.
  • “This was another solid quarter for the company, albeit seasonally not important,” said Stifel analyst Drew Crum.
  • Crum maintained a “hold” rating on Mattel shares citing valuation.
  • Mattel Shares were up 2.4% at $44.04 on the Nasdaq on Wednesday afternoon.

*To view original article from www.reuters.com click here.

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