Reuters: Hot Stocks: REFILE-UPDATE 4-Cost cuts, American Girl help Mattel beat expectations

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REFILE-UPDATE 4-Cost cuts, American Girl help Mattel beat expectations Apr 17th 2013, 14:39 Wed Apr 17, 2013 10:39am EDT (Corrects date in dateline) * Earnings per share of 11 cents exceed 9-cent Wall Street view * Sales rise 7 percent * CFO says full-year SG&A expenses will be higher than last year * Shares rise 6 pct to highest in nearly 15 years By Dhanya Skariachan April 17 (Reuters) - No. 1 toymaker Mattel Inc reported stronger-than-expected first-quarter results, helped by cost controls and higher demand for American Girl and Monster High dolls, sending the company's shares to their highest level in nearly 15 years. Mattel shares rose as much as 6 percent in early trading on Wednesday. The company, best known for its Barbie dolls and Hot Wheels cars, has raised prices globally and started making products for local consumption in countries including Brazil and India to hold the line on costs. Local production helps Mattel get products to stores faster and cut down on import duties and shipping costs, it told Reuters earlier this year. 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. Mattel 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 a share, from $7.8 million, or 2 cents a share, a year earlier. Analysts on average were expecting a profit of 9 cents a 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. He maintained his "hold" rating on Mattel shares, citing their valuation. Mattel's sales rose 7 percent to $995.6 million, beating the analysts' average estimate of $986.5 million. Sales were down 2 percent for Barbie-branded items and fell 7 percent for Fisher-Price toys, but rose 32 percent for American Girl products. Demand was also strong for Monster High dolls. 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. (Additional reporting by Siddharth Cavale in Bangalore; Editing by Lisa Von Ahn, David Goodman and Supriya Kurane) Link this Share this Digg this Email Reprints

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