Although it's still early in the game, there are indications that the new management team at Mattel Inc. is steering the company in the right direction.

The troubled toy manufacturer has managed to come through the holiday season in good shape, and Wall Street has taken notice. On Jan. 16, Mattel's shares closed at $15, up 67.8 percent from a 52-week low of $8.94 last March.

The company's shares got a boost at the beginning of January when retailer Toys R Us Inc. announced that its holiday sales had surpassed expectations and were up 4 percent from the previous year.

"Despite dire predictions for the retail sector, toys sales seemed to have fared well this holidays season," said Hayley Kissel, an analyst with Merrill Lynch Global Securities. "And since there were no hot-selling, new products this year, people returned to the basics, which is likely to have benefited Mattel with its tried-and-true product line."

Mattel is not expected to release fourth-quarter and year-end results until February, and company spokeswoman Lisa Marie Bongiovanni declined to divulge whether Mattel's earnings surpassed expectations as a result of a strong holiday season.

The investment community, however, is anticipating a healthy increase in earnings for the fourth quarter. The analyst consensus estimate, according to Zacks Investment Research, calls for net earnings of $0.25 per share for the quarter ended Dec. 31, up from a net loss of $0.04 per share for the like quarter one year previous.

It's not just the better-than-expected holiday sales that underlie the renewed confidence in Mattel's prospects. The market is also feeling encouraged by the new management team that, under new Chairman and Chief Executive Robert Eckert, has initiated a bold restructuring plan to return Mattel to profitability in the coming years.

"The stock is strong because the strong initial moves by the new team have created a general sense of optimism about Mattel's long-term future," said Jill Krutick, an analyst with Salomon Smith Barney Inc. "They have made some decisive first moves, but it's still too early to say how they will come through in the long run."

Last September, Eckert announced a series of changes to bolster Mattel's bottom line. The moves included the sale of The Learning Co., the software developer that Mattel acquired in 1999 in an effort to diversify its operations and which to a large extent had been the company's financial undoing (and cost former Chief Executive Jill Barad her job).

Gores Technology Group struck a deal to buy The Learning Co. from Mattel, which took an after-tax loss of $430 million.

In addition, Eckert has eliminated 350 positions at Mattel's headquarter in El Segundo, and slashed dividend payments from 9 cents a share per quarter to 5 cents per year. Meanwhile, he's working to discontinue unprofitable product lines, further reduce production and manufacturing costs and to reduce the royalties the company pays under its licensing contracts.

Bongiovanni declined to say to what extent these moves have been implemented.

Thus far, the restructuring has been a drain on its bottom line. For the quarter ended Sept. 30, the company reported a net loss of $336.9 million (79 cents per share), compared to $222.2 million (52 cents per share) for the like quarter one year earlier. Revenues were $1.5 billion for the quarter, essentially unchanged from the prior year.

The drop in earnings was predominantly the result of a $105 million restructuring charge.

Despite the short-term earnings hit, Eckert's turnaround strategy has gotten the implicit support of some of Mattel's directors, who have been investing heavily in the company.

Filings with Securities and Exchange Commission show that from late October to early November of last year, outside director Ralph Whitworth, principal of Relational Investors, acquired 2 million shares for prices between $12.51 and $13.53 a share, for a total cost of $26.3 million. John Vogelstein, another Mattel outside director and chairman of E.M. Warburg, Pincus & Co., acquired 369,000 shares for a total of $4.2 million in late October.

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