* Earnings per share of 11 cents exceed 9-cent Wall Street
* Sales rise 7 percent
* CFO says full-year SG&A expenses will be higher than last
* Shares rise 6 pct to highest in nearly 15 years
(Adds analyst comments, updates share movement)
By Dhanya Skariachan and Siddharth Cavale
April 17 Chubby-faced American Girl dolls and
the "descendants" of Dracula and Frankenstein's monster are
helping Mattel Inc boost sales to pre-teen girls as its
iconic Barbie franchise shows signs of aging.
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, helping it turn in stronger-than-expected
earnings and boosting its shares to near a 15-year high.
Overall sales rose 7 percent, also beating market
expectations. Mattel said on Wednesday that sales were also
driven by demand for "Monster High," dolls depicting the
"descendants" of famous horror story characters.
In contrast to soaring sales of American Girl products,
sales of Mattel's flagship Barbie dolls were essentially flat in
the quarter, after taking currency fluctuations into account.
"The American Girl segment provided the biggest surprise of
the quarter," MKM partners analyst Eric Handler said in research
note. Handler had expected the American Girl business -- which
contributed 10 percent of total revenue -- to show revenue
growth of 6 percent instead of the 32 percent Mattel reported.
Mattel sells its American Girl toys in its own stores. Most
of its other brands sell through retailers like Wal-Mart
, Target or Toys R Us.
The American Girl line was introduced in 1986 by a company
bought by Mattel in 1998.
Mattel, also known for its Hot Wheels toys, also managed to
raise prices globally and cut costs by starting to make products
for local consumption in countries such as Brazil and India.
Local production helps the company get its products to
stores more quickly and cuts down on import duties and shipping
Mattel said selling, general and administrative (SG&A) costs
as a percentage of net sales fell by 30 basis points to 37.1
percent in the first quarter.
For the full year, however, the company forecast SG&A
spending to be higher than last year. 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, Chief Financial Officer Kevin Farr said on a
post-earnings call with analysts.
Farr said he expects gross margins in the low-to-mid 50
percent range for the full year. Mattel reported first-quarter
gross margins of 54.2 percent.
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.
The first quarter is typically the least significant of the
year in terms of sales for toy companies. They 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, who
maintained a "hold" rating on Mattel shares, citing valuation.
Mattel's sales rose 7 percent to $995.6 million, beating the
average analyst estimate of $986.5 million.
Sales of Fisher-Price toys fell 7 percent.
Analysts such as Sean McGowan with Needham have tied some of
the weakness in the Barbie brand to the rising popularity of
other Mattel dolls, such as Monster High, which appeared on many
hot toy lists in 2012.
Mattel shares were up 2.4 percent at $44.04 on the Nasdaq on
(Additional reporting by Siddharth Cavale in Bangalore; Editing
by Lisa Von Ahn, David Goodman and Ted Kerr)