) reported first quarter 2012 adjusted earnings of 6 cents per
share, missing the Zacks Consensus Estimate by a penny. However,
including an unfavorable impact of 4 cents related to the HIT
Entertainment acquisition and integration costs, the company
recorded earnings per share of 2 cents, which was below the
year-ago quarter earnings of 5 cents per share. The
lower-than-expected results were due to acquisition related costs
and weak performance of its core brands including Barbie and Hot
During the quarter, net sales were $928.4 million, down 2% year
over year from $951.9 million and were also below the Zacks
Consensus Estimate of $986.0 million. Net sales included an
unfavorable foreign currency impact of 1%. Worldwide gross sales
were $1,017.2 million versus $1,041.1 million in the prior-year
period. U.S. gross sales dipped 9% year over year while
international gross sales rose 7% year over year.
Worldwide gross sales for Mattel Girls & Boys Brands
business unit declined 4% year over year to $622.2 million, as
worldwide gross sales for Barbie slid 6% and Entertainment business
fell 17%, partially offset by a 22% upside in Other Girls Brand,
driven by Monster High. Worldwide gross sales for the company's
core brand Hot Wheels also dropped 5%. Fisher-Price Brands sales
remained flat year over year at $310.2 million while the American
Girl line grew 4% to $76.0 million.
Gross profit also remained flat year over year at $473.4
million, but gross margin expanded 130 basis points (bps) year over
year to 51.0% due to a 130-bp plunge in cost of sales.
Operating income also fell 22% to $28.7 million, but operating
margin expanded 80 bps to 3.1% due to lower administrative and
promotional expenses (down 20 bps), partially offset by a 230-bp
rise in other selling and administrative expenses.
At the end of the first quarter of 2012, Mattel's cash and cash
equivalents were $784.6 million compared with $1,049.4 million in
the first quarter of 2011. Long-term debt was $1,150.0 million
versus $950.0 million in the year-ago quarter.
The company's debt-to-total-capital ratio was 37.0% at the end
of the reported quarter. As of March 31, 2012, shareholders'
equity was $2.6 billion versus $2.5 billion as of March 31,
During the quarter, Mattel repurchased 700,000 shares for
approximately $20 million and declared a quarterly dividend of 31
cents per share payable on June 15 to shareholders of record as of
The company's first quarter results were below expectations as
total revenue decreased on a year-over-year basis and we expect
estimates to move down in the coming days. The Zacks Consensus
Estimates for 2012 and 2013 are pegged at $2.43 and $2.71,
We have a Neutral recommendation on Mattel over the long term as
it has an industry leading position, strong balance sheet and is
reaping benefits from its cost-containment initiatives. Its focus
on top-line growth, margin expansion, building new franchises,
optimizing entertainment partnerships, expanding international
footprint and effective cash deployment also augur well.
However, we remain cautious on the stock due to increasing input
costs, uncertainty regarding the ongoing litigation with MGA
Entertainment and competition from private label toys, unfavorable
fluctuations in currency exchange rate, and the video game
Mattel currently retains a Zacks #2 Rank, which translates into
a short-term Buy rating. One of Mattel's primary competitors,
JAKKS Pacific, Inc.
) will release its first- quarter 2012 results on April 18,
JAKKS PACIFIC (
): Free Stock Analysis Report
MATTEL INC (
): Free Stock Analysis Report
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