UPDATE 1-Mattel on track to achieve savings target-CFO
* Still targeting $180 mln-$200 mln total savings by 2010
* Sees long-term gross margin 50 pct of net sales
* Shares up 1.5 percent
NEW YORK, June 17 (Reuters) - Mattel Inc MAT.N, the world's biggest toy company, is on track for cumulative savings of up to $200 million by the end of 2010 as it cuts costs to offset lower sales in the economic downturn.
Mattel, which has cut 1,000 jobs, shaved expenses tied to corporate travel and taken steps to trim distribution and advertising costs, is already looking at savings of $90 million to $100 million this year, Chief Financial Officer Kevin Farr said on Wednesday at the company's annual analysts meeting, which was also webcast.
The workforce reduction would result in savings of $60 million, while a tighter travel policy would yield a 20 percent to 25 percent reduction in those expenses, Farr said.
Mattel, with key brands such as Barbie and Hot Wheels, has already raised prices of its toys in 2009. It has faced high input costs in the past few years, although some commodity costs have eased a bit recently.
Raw materials like resin and packaging make up about 40 percent of Mattel's cost of goods sold, while labor makes up about 17 percent.
"Quite frankly, we have not done a good job of pricing our products to reflect these increasing costs," Farr said, blaming that for the decline in Mattel's gross margins over the past five years.
"It's our goal to increase gross margins over time by pricing for innovation, pricing for the new reality in costs and continuing our focus on cost-efficiency programs."
With those initiatives, Mattel expects gross margins to increase to 50 percent of net sales over time, Farr said.
For the first quarter, Mattel had reported a gross margin of 44 percent, helped by price increases.
Mattel's sales have been pressured in the past months as toy retailers slash inventories to match tepid consumer demand in the recession.
Mattel itself has reduced its inventory and told Reuters last week that it would rather make toys when it had a good grip on consumer demand than be stuck with excess inventory. Almost two-thirds of its sales come in the fall season, which includes the holidays. [ID:nN11518818]
Farr said Mattel was still targeting capital expenditures of $150 million for the year. It is looking for $800 million to $1 billion in cash at year-end.
Mattel shares rose 1.5 percent to $15.90 on the New York Stock Exchange. (Reporting by Aarthi Sivaraman; Editing by Lisa Von Ahn)
