Mattel Expects Challenging Economy to Continue Through 2009
18 June 2009 - 4:41AM
Dow Jones News
Mattel Inc. (MAT) is on track with cost-cutting targets and
continues to believe the toy industry will hold up fairly well even
as the economy remains difficult through 2009, executives said
Wednesday.
"As I've said before, there isn't a lot of good news out there,
but the absence of new bad news is at least helping to neutralize
consumer sentiment," company Chairman and Chief Executive Robert A.
Eckert said during the world's largest toy maker's annual
analyst-day presentation.
He and Chief Financial Officer Kevin Farr didn't comment
specifically on recent sales or ordering trends during the
presentation, the Internet broadcast of which was cut short.
Analysts surveyed by Thomson Reuters expect the El Segundo, Calif.,
company to post 2009 earnings of $1.18 a share on $5.6 billion in
revenue.
But Farr reiterated Mattel's February comments that the top line
will be pressured in 2009 by the foreign-currency exchange effects
of a stronger U.S. dollar, consumer pullbacks, retailers' desire
for less inventory, and a relatively light year for blockbuster
movies that can generate toy tie-ins.
For 2010, Needham & Co. analyst Sean McGowan said, Mattel
has the toy rights tied to a Walt Disney Co. (DIS) animated musical
based on the Rapunzel story that will feature the same musical team
who wrote the music for the movies "The Little Mermaid" and "Beauty
and the Beast."
"We did NOT expect this product for 2010, so this news is
incremental to our product assumptions for next year," McGowan told
clients in a note Wednesday.
Mattel also has the toy rights to Disney Pixar Animation Studios
Inc.'s "Cars" movie. McGowan said the full-length animated sequel
is coming in 2011 and Mattel has the toy rights for it, too.
During the webcast, CFO Farr said Mattel remains on track for
$90 million to $100 million in net cost savings in 2009 and $180
million to $200 million in savings by the end of 2010.
In November Mattel cut 1,000 jobs worldwide, or about 4% of its
workforce, and it is taking other cost-cutting steps related to
outsourcing information technology services and reducing the number
of items in its product lineup.
Farr said Mattel, "over time," is targeting gross margins of 50%
as it passes along pricing better than it has in recent years and
produces innovative, higher margins products.
Mattel had 17.2% of the U.S. toy market in 2008, up 30 basis
points from the previous year and topping cumulative share gains
for the seven next-largest toy makers, the company said, citing
research from the NPD Group. Its iconic Barbie brand had 30% of the
market for fashion dolls, up 1.2 percentage points, last year.
Shares of Mattel recently traded up 16 cents, or 1%, at $15.82.
Year to date, shares are down 2%, compared with a 1.5% decline in
the Standard & Poor's 500.
-By Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145;
maryellen.lloyd@dowjones.com