UPDATE 3-Mattel sees strong 2010 despite Q4 sales miss
* Sees strong 2010, optimistic on new toy lines
* Q4 EPS ex-items 81 cents vs. Street's 68 cents
* Sales up 1 pct at $1.96 bln, but miss Wall Street view
* Shares down 1 pct (Recasts first paragraph to include 2010 outlook, adds analyst comments and byline, updates stock activity)
By Dhanya Skariachan
NEW YORK, Jan 29 (Reuters) - Mattel Inc (MAT.O) reported a holiday-quarter profit that beat Wall Street estimates and forecast a strong 2010 from new toy lines and renewed demand for its Barbie dolls.
Shares of Mattel rose initially, but then fell on disappointing holiday revenue figures and investor worries that higher labor costs could limit gross margin growth.
Mattel's profit for the quarter beat expectations due to lower resin prices and cost-cutting initiatives.
Its fourth-quarter net income rose to $328.4 million, or 89 cents a share, from $176.4 million, or 49 cents a share, a year earlier.
Excluding a tax benefit, the profit was 81 cents a share, beating the analysts' average forecast of 68 cents, according to Thomson Reuters I/B/E/S.
Net sales in the fourth quarter rose 1 percent to $1.96 billion, including a benefit of 4 percentage points from changes in currency exchange rates. Analysts had expected sales of $1.98 billion.
The company is hoping to gain from the release of "Toy Story 3 movie" and it recently gave its 50-year-old iconic product Barbie a facelift.
While Barbie and its classic Hot Wheels brand saw percentage sales growth in double digits, Mattel reported flat sales at its Fisher-Price and American Girl brands.
"We think Mattel will face a difficult selling environment in 2010 but expect momentum at Barbie and Hot Wheels to continue," Standard & Poor's analyst Erik Kolb said in a note.
The company, whose rivals include Hasbro HAS.N and Hello Kitty creator Sanrio Co Ltd (8136.T) of Japan, is expanding its presence in emerging markets like China and India to offset weakness at home.
Mattel said gross sales fell 2 percent domestically and rose 3 percent internationally.
"We are concerned about some core brands, like Fisher Price, which fell 3.2 percent. We also expect international sales to continue outpacing domestic," Kolb said.
Other analysts said the share price fall was unwarranted due to the toy maker strong prospects in 2010.
"We expect 2010 sales to benefit from new product lines, a potentially improved economy, and the Toy Story 3 movie release," Morgan Joseph analyst Jeffrey Blaeser said. He upgraded the stock to a "buy."
Mattel shares were down 19 cents at $19.85 in afternoon trading. They have nearly doubled after touching a 52-week low of $10.36 last March. (Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn and Tim Dobbyn)
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