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|Mattel: Better Times in Toyland|
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Registered Member #878Joined: Sun Jan 28 2007, 10:53PM
| Barbie has been up against tough competition recently, like interactive video games and her glitzier rivals from MGA Entertainment, the Bratz dolls. But her maker, Mattel (NYSE:MAT - News), said on Jan. 29 that it's been keeping sales up nonetheless and managing to improve profits. The El Segundo (Calif.) company's fourth quarter results got a lift from things like its acquisition of the electronic entertainment toys maker Radica Games completed on Oct. 3. |
Mattel posted net income of $286.4 million during the three months ended Dec. 31, up 2.6% compared to the same period of 2005. "I am pleased with our 2006 results as we made good progress in addressing the two key challenges facing the company: U.S. sales declines in the Barbie brand and pressure on our gross margins," said Mattel CEO Robert A. Eckert in a press release.
Mattel's net sales during the fourth quarter were $2.11 billion, up 14% compared to the same period last year, including the favorable impact of foreign currency exchange rates.
CEO Eckert has broadened his product line of toys in recent years (see BusinessWeek.com, 12/13/02, "Barbie vs. the Bratz"). For example, Mattel sells dolls based on Dora the Explorer, from the TV show on Nick Jr.; she takes on dangerous adventures, solves challenging quests, and can speak more than one language. In another effort to turn the company around, Mattel in Oct. 2005 said it consolidated its Mattel Brands and Fisher-Price Brands divisions, lumping Barbie, Hot Wheels and Fisher-Price in with licensed entertainment properties like Dora, Batman, and Sesame Street.
Fisher-Price sales gained 16% worldwide during the fourth quarter. Not that Mattel is ignoring Barbie. The company has been trying to help her popularity with experiments like a Barbie video game and also a Web site barbie.com, which attracts millions of viewers (see BusinessWeek.com, 7/18/06, "Mattel's Barbie Trouble"). Barbie's worldwide sales were up 3% during the fourth quarter, compared to 1% during the third. Before that, Barbie's sales had fallen for 11 consecutive quarters.
Mattel is also trying to improve the amount that it profits on each sale, taking steps like raising its prices and saving money on its business process. During the recent quarter, the company's gross margin increased by .20% of net sales.
"Barbie's domestic gross sales grew for the year with four consecutive quarters of U.S. growth and our gross margins also grew in 2006, the first increase since 2003. Although positive trends, we have more to achieve on both fronts," CEO Eckert said in the press release.
Standard & Poor's Equity Research now expects Mattel's revenue to grow by 4% in 2007. Analyst Erik Kolb upgraded his rating on the stock to hold from sell on Jan. 29. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)
But investors sold the stock 1.4% to $23.62 in early afternoon trading on the New York Stock Exchange Jan. 29. Mattel had hit its high of the year earlier Jan. 29 at $24.78 per share, after trading as low as $15.50 in Jan. 2006.
Pallavi Gogoi in New York and Christopher Palmeri in Los Angeles contributed to this report.
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Registered Member #145Joined: Sun Apr 20 2003, 03:52PM
Location: Bakersfield, USA
|As parents buy, makers push pricier toys |
When Spin Master Ltd. started peddling its Air Hogs Zero Gravity vehicle two years ago, retailers doubted whether parents would be willing to pay $59.99 for a radio-controlled toy -- even if it climbed walls.
But the item ended up being a hit and was followed by the equally popular $79.99 Storm Launcher. This year, Spin Master is pushing a $110 Robo Copter that transforms from a robot to a helicopter.
"This just proved to us that if it is a great toy, provides a wow and introduces new functions, consumers are willing to spend the money," said Harold Chizick, vice president of global promotional marketing for the Toronto-based toy maker. "We just decided to step it up."
For years, the increasing power of discounters like Wal-Mart Stores Inc. kept the toy industry locked in fierce price wars. But the toy makers are encouraged by parents who last holiday were willing to spend $300 on Hasbro Inc.'s robotic Butterscotch pony and $249 for a Mindstorms NXT robotics kit from Lego Systems Inc. As the annual American International Toy Fair starts Sunday, the toy makers are getting bolder when it comes to pushing pricier, higher-quality toys.
Zizzle LLC., which did well with its $300 pinball machines last year, is adding more lights and sounds, and increased the price to $350, according to CEO Roger Shiffman. MGA Entertainment Inc., the maker of the popular funky Bratz doll, is coming out with toys that break the $150 barrier; last year, the threshold was $100.
Among the items at the fair, which features toys expected in stores later this year: Hasbro's $69.99 Squawkers McCaw Parrot, which repeats words and responds to touch; Mattel Inc.'s Fisher-Price guitar system, priced at $99.99, that plugs into the TV; VTech Holdings Ltd.'s $99.99 Gadget, which functions as a digital photo and video camera and music player; and Spin Master's $80 Wheels 'n Whistles foam coach.
"This game is about better quality," said Ronald D. Boire, president of Toys "R" Us's U.S. toy business. "It is not about plastic by the pound. We have been playing plastic by the pound for way too long." He said Toys "R" Us will be making a bigger push to carry higher-grade toys.
Consumers' willingness to spend on toys is helping to revive the toy industry, after struggling for several years with declining sales as kids opted for digital music players and video games.
Last year marked the first time U.S. traditional toy sales rose in several years, albeit only slightly, according to NPD Group Inc., a research company based in Port Washington, N.Y. Traditional toy sales -- excluding game consoles and related items -- eked out a 0.34 percent rise to $22.3 billion compared to $22.2 billion in 2005, and $22.7 billion in 2004. Meanwhile, the average ticket price for toys rose 5 percent in 2006 to $7.52, compared to $7.17 in 2005 and $6.97 in 2004, according to NPD, whose figures are based on a consumer survey.
Wedbush Morgan Securities analyst Sean McGowan and other toy analysts believe that NPD's figures understate the improvement. They cite that Toys "R" Us Inc., which is under new ownership and management, had its best holiday season in several years. Privately-held KB Toys, which emerged from bankruptcy in 2005, is also showing signs of improvement.
Business at the nation's top two toy makers is also strengthening. Mattel Inc. posted a 3 percent profit gain for the fourth quarter, boosted by a turnaround of its iconic Barbie line and strong sales of Fisher-Price toys, including the popular T.M.X. Elmo doll, one of the hottest sellers for the holiday 2006 season. Barbie sales increased 3 percent in the United States, the fourth consecutive quarter of domestic growth. Mattel is unveiling Chat Divas at the fair, Barbie dolls that move and lip sync to music hooked up to Apple Inc.'s iPod digital music player and can also chat on the phone.
Hasbro is expected to announce solid fourth-quarter results Friday.
"Two thousand six was the first year that I think there was definitely a lot of creativity and a lot less reliance on retro, classic toys," said Gerrick Johnson, a toy analyst at BMO Capital Markets.
Microchips have come down in price, enabling toy companies to make more advanced toys that are still affordable. Zizzle's Shiffman noted one of last year's toys -- Lucky, a $39.99 interactive dog that obeyed 15 different commands -- would have sold for $150 five years ago.
At least 50 percent of the toys that will be sold in stores this year will have some sort of microchip in them, according to Jim Silver, editor-in-chief of Toy Wishes, a trade publication.
But toy analysts say shoppers are still discerning. Playmates Toys Inc., which had a surprise hit with its $100 Amazing Amanda doll in 2005, failed to replicate its success last holiday season with Amazing Allysen because the interactive dolls were too similar, according to Silver.
And the threat of new hot gadgets is not going to go away. The toy industry has to keep coming out with innovative items, said Mattel president Neil Friedman.
"When we have great toys, the consumer comes back to the toy department," he said. "Can the toy industry and other industries co-exist? Absolutely. Consumers will buy what the child wants."
Source:Associated Press 02-08-07
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