NEW YORK (Reuters) - The world's largest toy makers posted sharply different quarterly results on Monday, with Hasbro Inc <HAS.N> riding its hot Transformers line to a surprisingly strong profit, while legal expenses and rising costs hurt Mattel Inc's <MAT.N> bottom line.
By Justin Grant
NEW YORK (Reuters) - The world's largest toy makers posted sharply different quarterly results on Monday, with Hasbro Inc <HAS.N> riding its hot Transformers line to a surprisingly strong profit, while legal expenses and rising costs hurt Mattel Inc's <MAT.N> bottom line.
Hasbro outshined industry-leading Mattel as demand for Littlest Pet Shop and Playskool toys pushed the second-largest U.S. toy company to first-quarter results which topped Wall Street's expectations.
Shares of Hasbro surged 9 percent higher after the maker of Monopoly board games said first-quarter profit climbed 14 percent to $37.5 million, or 25 cents a share, from $32.9 million, or 19 cents a share, a year earlier.
!ADVERTISEMENT!Wall Street analysts were expecting Hasbro to earn 14 cents a share for the quarter, according to Reuters Estimates.
Investors pushed Mattel's shares 8 percent lower after it blamed an unexpected quarterly loss on lower sales of Fisher Price toys, expenses stemming from litigation with MGA Entertainment over Bratz dolls, and higher product costs.
The maker of Barbie dolls and Hot Wheels said its first-quarter loss totaled $46.6 million, or 13 cents a share, compared with a year-earlier profit of $12 million, or 3 cents a share. Analysts had expected a profit of 1 cent per share, according to Reuters Estimates.
"Mattel is feeling pain on several fronts in the short term," said David Leibowitz, managing director at Burnham Securities in New York.
"There's the legal expenses that continue to mount with respect to the MGA litigation, as well as the recalls. You also have the expense of product safety issues that are being addressed," Leibowitz added.
The first-quarter is typically a down period for toy makers as demand for playthings falls after the holiday shopping season, when most of the year's sales are made.
But stronger properties helped Hasbro outperform Mattel both domestically and internationally during the period, according to Sterne Agee analyst Margaret Whitfield.
"Hasbro's sales gain was extremely impressive," said Whitfield who has a "buy" rating on Hasbro and a "hold" rating on Mattel. "Star Wars and board games are performing extremely well ... They have done an incredible job across the board."
Mattel said its gross sales fell 11 percent in the United States, while rising 8 percent worldwide during the quarter.
Hasbro's sales climbed 6 percent in the United States and Canada, and were up 22 percent across the globe.
LOOKING AHEAD
Both companies have said they expect their 2008 results to be challenged as each absorbs the higher cost of doing business in China, where most toys sold in the U.S. are made.
Costs are also climbing due to the appreciation of the Chinese currency, additional product testing and higher prices for labor and commodities.
In order to drive profitability in the tough climate, Mattel said it implemented a mid-to-high single digit price increase which begins in June. Hasbro has predicted price increases as well.
Looking ahead, Mattel said it expects second-quarter sales to get a much-needed boost as it rolls out toys tied to potential summer blockbusters "Speed Racer," "Batman: The Dark Knight," and "Kung Fu Panda."
Hasbro is countering with items tied to "Iron Man," "Indiana Jones and the Kingdom of the Crystal Skull" and "The Incredible Hulk."
Hasbro's shares were trading at 15.9 times 2008 earnings, a premium to Mattel, which trades at 13.1 times.
Mattel's stock fell 8.2 percent to $19.99 in late-morning trading, while Hasbro climbed 9.2 percent to $34.46, both on the New York Stock Exchange.
(Reporting by Justin Grant; Editing by Lisa Von Ahn and Tim Dobbyn)
