Monday, July 11, 2011

Mattel Inc. (NASDAQ: MAT): Q2 Earnings Preview 2011

Mattel Inc. (NASDAQ: MAT), the world’s largest toymaker, is scheduled to release its second quarter earnings before the opening bell on Friday, July 15, 2011. Analysts, on average, expect the company to report earnings of 16 cents per share on revenue of $1.10 billion. In the year ago quarter, the company reported earnings of 14 cents per share on revenue of $1.02 billion.

Mattel, Inc., together with its subsidiaries, engages in the design, manufacture, and marketing of various toy products worldwide. Its products comprise fashion dolls and accessories, vehicles and playsets, and games and puzzles.

In the preceding first quarter, the El Segundo, California-based company's net income was $16.6 million, or 5 cents per share, compared to $24.8 million, or 7 cents per share, in the year-earlier quarter.  reported last year. On a per-share basis, earnings stood flat with last year at $0.89. Revenue increased 8 percent to $951.9 million from $880.1 million last year. Analysts, on average, expected the company to report earnings of 5 cents per share on revenue of $902.95 million.

Toy sales are expected to strengthen in 2011 as toymakers bet on new plush toys, digital updates to old classics and the return of an iconic relationship.

The company has benefited from continued strong demand for its core toy brands -- Barbie, Hot Wheels, Fisher-Price and American Girl. At its last earnings call in April, the company said that it is well positioned to improve operating margin and deliver strong cash flow for the year.

The company also plans to increase prices in the high single digit in 2011 to compensate for the rise in input cost and remains focused on achieving its long-term annual goal of 50% of gross margin and 15% to 20% of operating margins. Mattel plans to increase prices in the second quarter to offset rising costs of oil and labor in China, Chief Executive Officer Robert Eckert said on a conference call with analysts. “Our goal is to protect our margins,” Eckert said. Management remains focused on margin expansion through its cost-cutting initiatives and is thus targeting an additional cumulative cost savings of $150 million to be achieved by the end of 2012. Half the savings are expected from lower legal fees and the other half from the execution of round-two of the global cost-leadership initiative.

Going forward, the company’s product line looks strong with film releases including Cars 2 and Green Lantern in 2011 and Batman and Superman in 2012.

The consumer goods sector, more specifically the toy industry, has been taking measures to adapt to the changing times. After the recession instilled moderation in the hearts of customers, the sector has experienced trouble returning to its peak sales numbers. Higher oil and material costs have also weighed on results and forced some companies to begin taking actions in response to their dwindling margins.

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