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Tuesday, Jul 5, 2022

Mattel

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DAN TURNER Staff Reporter

The Cabbage Patch Snacktime Kids doll didn’t just eat hair; it munched up a good-sized chunk of Mattel Inc.’s fourth quarter earnings.

Mattel took a charge of $8 million, or 3 cents a share, to after-tax earnings during the fourth quarter because of its recall on the disastrous Christmas-season toy, which attracted headlines after several little girls got their hair and fingers caught in its chewing mechanism.

Making matters worse, the El Segundo-based toymaker took an additional charge of $15.1 million during the period to resolve an accounting dispute related to its licensing of characters from Walt Disney Co.

The Securities and Exchange Commission had threatened to hold up Mattel’s planned merger with Tyco Toys Inc. unless the dispute was resolved.

After the charges, Mattel ended up with a flat fourth quarter. Net income for the three months ended Dec. 31 was $113.5 million (41 cents a share), compared with $112 milion (40 cents a share) for the like period a year ago.

For the year, Mattel reported earnings of $377.6 million ($1.36 a share), compared with $357.8 million ($1.26 a share) in 1995.

Mattel CEO Jill Barad announced during a conference call with stock analysts last week that the company intends to sell non-core assets. She did not reveal which assets are on the block, but analysts speculated that they will be pieces of the non-performing sports and games divisions.

“There’s tough competition in games from Hasbro they dominate that category,” said analyst Margaret Whitfield with New York brokerage Tucker Anthony. “Some of Mattel’s board games might not have the impact that they should.”

Mattel makes such well-known games as Scrabble and Uno, but in recent years has produced a large number of less successful offerings. Its sports division, which makes hula hoops as well as sports equipment, is believed to be a drain on the company.

“When you’ve got something like Hot Wheels driving your engine, you don’t need a whole lot else,” said Lloyd Greif, CEO of L.A.-based investment bank Greif & Co.

Both Greif and Whitfield have a “buy” recommendation on Mattel, agreeing that the flat fourth quarter was the result of one-time charges and did not reflect any ongoing problems. Mattel shares closed at $25.75 on Feb. 6, down $1.63.

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