Mattel Sees Results From Barbie Makeover

Is Barbie back?

After two years of losing out to trendier rivals, the Mattel Inc. icon got a makeover last year, landing a look ripped from the pages of top fashion magazines and a celebrity promoter in Hilary Duff.

It looks like it paid off: Mattel, the world’s largest toy maker, said Monday that stronger sales of its Barbie line helped boost profit 33% in the fourth quarter.

The stock jumped 6% on the news.

El Segundo-based Mattel earned $284.3 million, or 68 cents a share, in the quarter that ended Dec. 31, compared with $213.9 million, or 49 cents, in the same period a year earlier. Quarterly sales rose 6% to $1.85 billion.

Excluding a $65-million gain from a settlement with the Internal Revenue Service, the company earned 52 cents a share. Analysts surveyed by Thomson First Call had expected 48 cents.

“It was a very sharp reversal,” said Sean McGowan of investment firm Harris Nesbitt in New York, who rates the stock “outperform.” “Mattel is back with better product. There should be fertile ground for a recovery in 2005.”

Although Barbie’s worldwide sales fell 1% in the fourth quarter, her sales in the U.S. rose 3% -- compared with a 25% plunge in the same quarter of 2003. And the 2004 fourth quarter marked the first domestic uptick in Barbie sales since the last quarter of 2002.

The made-over Barbie line is, basically, hipper and flirtier. Mattel -- which signed singer-actress Duff of television’s “Lizzie McGuire” to push Barbie products -- introduced Barbies sporting edgier hairstyles and of-the-moment accessories such as cellphones with instant messaging. Some of the dolls wear newsboy caps, hobo purses and midriff-baring street-savvy clothing. During the year, Barbie Cali Girl dumped long-standing flame Ken in favor of surfer dude Blaine.

Some analysts said the 45-year-old Barbie had finally turned a corner and figured out how to take market share back from competitors such as MGA Entertainment’s hip-hop Bratz dolls. Others said it was just too early to predict a sustainable comeback.

Tim Conder of A.G. Edwards & Sons Inc. said he wasn’t sure how much of the fourth-quarter sales uptick was due to the doll’s resurging popularity rather than Mattel’s ability to restock retailers’ shelves in late December, when some of its rivals couldn’t.

For all of Barbie’s success in the quarter, the biggest sales increases came in the Fisher-Price division, which includes the Little People and Rescue Heroes toys. Worldwide gross sales for this division rose 10% to $658.5 million in the quarter.

Other high spots for Mattel were its American Girl products, which gained 7% in the quarter, and games and puzzles, which climbed 30%.

“Despite a challenging retail environment, we finished the year with improved momentum,” said Robert A. Eckert, Mattel’s chairman and chief executive. “We made good progress on two of our key goals for 2004, by invigorating the Barbie brand and building on our success in the learning category.”

Mattel outperformed its major toy rivals during the holidays, analyst Conder said.

No. 2 toy maker Hasbro Inc. warned last month that its fourth-quarter sales were disappointing and forecasted flat earnings for the full year. Hasbro is scheduled to report its results next week.

For the year, Mattel posted net income of $572.7 million, or $1.35 a share, a 7% increase from $537.6 million, or $1.22 a share, in 2003. Sales rose 3% to $5.1 billion, up from $4.96 billion in 2003.

Conder rates Mattel a “hold,” partly because of erosion in the company’s gross profit margin, which slid to 47.2% last year from 49% in 2003 because of rising resin, labor and fuel costs. Indeed, rising costs prompted Mattel to increase prices 2% to 4% on many of its products starting in January.

Some analysts question how much upside Mattel’s earnings will have in 2005 as video games and consumer electronics are expected to keep taking share from traditional toys. Another worry: Hasbro holds the toy license to one of the year’s likely hot movies, “Star Wars: Episode III -- Revenge of the Sith.”

Mattel’s shares hit a 52-week high Monday of $20.30 before closing at $19.45, up $1.10, on the New York Stock Exchange.