Mattel in no mood to party as Barbie feels her age

Toy maker’s profits plunge as global downturn bites
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The Independent Online

Everything is starting to sag as Barbie approaches her 50th birthday.

The plastic princess may be getting made up ready for her big party next month, but there is no disguising the wrinkles that have appeared in her formally svelte sales figures – and there is simply nothing pretty about the bottom line.

Barbie’s contribution to the toy giant Mattel’s financial results yesterday was so disappointing that its shares plunged by more than 15 per cent on the announcement.

The doll range, conceived by Ruth Handler, the wife of Mattel’s co-founder, in 1959, saw its global sales tumble by 21 per cent in the final three months of last year, as the recession crimped Christmas present buying and the rising dollar reduced the value of overseas income. These woes compounded Barbie’s long-running battle with the signs ofageing, which has resulted in lost business to competition from younger, trendier models.

However, Barbie did at least win one recent confrontation with the upstart challenger Bratz, after Mattel successfully sued Bratz owner MGA, claiming that the brand was created by a Mattel employee and was therefore Mattel’s property.

Overall, Mattel’s profit for the quarter of $176m was 46 per cent down on the same period in 2007, and missed forecasts from Wall Street analysts.

The company also owns Matchbox and Hot Wheels cars and Fisher-Price toys, as well as dozens of other less wellknown brands.

The collapse of Woolworths in the UK was one of the factors cited by Robert Eckert, Mattel chief executive, as he unveiled the gloomy results yesterday.

“Toy retailers weren’t immune to the economic downturn, with significant toy sellers in the US, UK, Mexico and other major markets either closing their doors or entering bankruptcy,”

he said. “Against that backdrop, we underperformed for the quarter, and ultimately the year, due to a combination of lacklustre sales, lower gross margin and higher expenses.”

The current year would be one of relentless cost-cutting for Mattel, Mr Eckert warned, and the company is trying to push through higher prices to improve profitability. However, it warned that the year would be rocky, with consumers reluctant to countenance much in theway of inflation.

Analysts said the build-up of unsold stockontoy store shelves and in warehouses would hobble results in the early part of2009, with Mattel unable to implement price rises until this surplus is eliminated.

Gerrick Johnson, of BMO Capital Markets, said he was concerned that Mattel’s inventories had risen by 13 per cent. “That means things deteriorated much more quickly than they had planned,” he said.