Mattel Misses Overall

Zacks

Mattel Inc.’s (MAT) fourth quarter 2012 adjusted earnings of $1.12 per share missed the Zacks Consensus Estimate by 1.75% but grew 4.7% year over year. Year-over-year increase in net sales led to the growth in earnings. On a reported-basis, including a litigation charge, earnings per share were 87 cents, down 18.7% year over year.

During the quarter, net sales grew 5.0% year over year to $2.26 billion despite an adverse foreign currency impact of 1 percentage point. Other girls’ brand, American Girls as well as Fisher-Price Brand were major contributors to sales growth. However, revenues fell shy of the Zacks Consensus Estimate of $2.30 billion.

Quarter Highlights

Worldwide gross sales were $2.50 billion, up 6.1% year over year. Gross sales from North America (comprise the U.S., Canada and American Girl)  increased 5% year over year while international gross sales leaped 8.0% year over year, despite an adverse currency impact of 2 percentage points.

Mattel’s product segment comprises Mattel Girls & Boys Brands, Fisher-Price Brands and American Girl Brands. Gross Sales for Mattel Girls & Boys Brands business unit expanded 5% year over year to $1,411.5 million. Sales for Barbie was down 4% but for Other Girls Brands were up 55% buoyed by Monster High brand.

Gross sales for the Wheels business were down 1%, mainly due to Matchbox. The sales for Entertainment business plummeted 13% hurt by the sluggish business in the Cars 2 movie property.

Fisher-Price Brands sales climbed 6% to $744.5 million while the American Girl line leaped 13% to $320.8 million.

Gross margin expanded 40 basis points (bps) year over year to 54.3% while operating margin declined 610 bps to 16.6%. Increased Other selling and administrative expenses put pressure on the operating margin.

Full Year Highlights

For full year 2012, adjusted earnings per share were $2.47, which missed the Zacks Consensus Estimate by around 3.1% but grew 13.3% year over year.

On a reported-basis, earnings per share were $2.22 cents, up 1.83% year over year. Worldwide net sales were up 2% to $6.42 billion, which missed the Zacks Consensus Estimate of $6.46 billion.

Dividend

During the quarter, the company declared a cash dividend of 36 cents per share for the first quarter of 2013, reflecting an annualized dividend of $1.44 per share. This represents a 16% increase to last year’s total dividend.

Our Take

Mattel currently carries a Zacks Rank #3 (Hold). After reporting better-than-expected results for two successive quarters, Mattel performed below expectations this quarter. Although the company’s increasing international footprint, particularly in the emerging markets and new franchises and entertainment partnerships remain positives for the stock, we believe, increasing input costs and tough retail environment remain the areas of concern.

However, growth in revenue and solid dividend distribution amid a backdrop of stringent economy comes across as a ray of hope for investors.

Some other toy companies which will likely report this month are Hasbro Inc. (HAS), LeapFrog Enterprises Inc. (LF) and JAKKS Pacific Inc. (JAKK). Hasbro is slated to report its fourth quarter 2012 results on Feb 7 while LeapFrog and JAKKS Pacific will likely report on Feb 6 and Feb 18, respectively.
 

Read the Full Research Report on JAKK

Read the Full Research Report on HAS

Read the Full Research Report on MAT

Read the Full Research Report on LF

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