By Deepa Babington
NEW YORK, July 20 (Reuters) - Mattel Inc. and Hasbro Inc., the top two U.S. toymakers, said on Thursday their profits slumped in the second quarter as a strong U.S dollar hurt international revenues and a prospective shortage of electronic chips muddied the outlook for the rest of the year.
Mattel(NYSE:MAT - news), which makes Barbie dolls and Hot Wheels cars, reported a 64 percent decline in profits to $6 million, or a penny a share, after international sales dropped 9 percent, largely because of a weak euro.
Hasbro Inc.(NYSE:HAS - news), the No. 2 U.S. toymaker and Mattel's biggest rival, posted an even larger decline in profits of almost 80 percent to $6.5 million, or 4 cents a share. Higher worldwide sales of products related to the Pokemon craze failed to offset slumping sales of Star Wars and Furby products, last year's must-haves.
Hasbro's share price dropped 3-7/8 to close at 12-1/16 on the New York Stock Exchange, while Mattel fell 3/8 to end the day at 12-3/4. Both companies matched Wall Street's expectations, but analysts fretted an electronic components shortage could threaten second-half results at both toymakers.
``The numbers that were reported for second quarter were probably not much of a surprise,'' said David Leibowitz, managing director at Burnham Securities. ``The unsettling piece of information was that the second half is unlikely to live up to optimistic projections.''
Hasbro said the chip shortage combined with a cooling of the once red-hot Pokemon craze in the United States could hurt second-half results. Mattel said it was comfortable with Wall Street's consensus earnings estimates for the full year -- subject to the chip availablity and foreign exchange rates.
In local currency terms, Mattel's international sales were down only 3 percent. The company said it expected its performance outside the United States to improve in the second half. Total revenues rose 2 percent to $817.8 million from $802.3 million a year ealier.
Hasbro, which also makes Parker Brothers and Milton Bradley board games such as Monopoly, said unfavourable foreign exchange rates shaved 2 percent, or $17 million from revenues, which slipped to $778.4 million from $874.6 million a year earlier.
The euro, which last year replaced the currencies of 11 European nations, has lost 8 percent of its value against the dollar in the 12 months ended June 30.
An unexpected surge in demand for wireless phones and hand-held computers has led to the rationing of chips to slower growing industries such as toy makers, analysts said.
``Given how significant electronics have become in the toy industry, a chip shortage will have a dampening effect on the outlook for both Hasbro and Mattel. Exactly how much, remains to be seen,'' Leibowitz said, noting nearly half of all toys are now electronic.
Hasbro told analysts the chip shortage could delay delivery of some new products by 30 to 60 days. Mattel told analysts a chip shortage would principally affect its preschool division, including the Fisher-Price, Sesame Street and Disney brands.
``Hasbro has a lot more tech toys, ... they have more exposure'' to any chip shortage, said Margaret Whitfield, an analyst at Tucker Anthony Cleary Gull, addding she was also concerned about Mattel.
``The industry faces a tough comparison from last year when things were going in favour of Hasbro,'' said Gerard Klauer Mattison analyst Sean McGowan, referring to Star Wars and Furby mania that boosted Hasbro's sales. And at Mattel, ``we're still in the midst of a turnaround.''
Mattel has been beset by problems since its $3.5 billion acquisition last year of education software developer The Learning Co. The software unit, now up for sale, had racked up huge losses, resulting in the ouster of Mattel's Chief Executive Jill Barad. The company's share price plunged to single-digits at one point.
Preserved here on Mystic Fortress' server to avoid a bad link in the future.
Article is quoted from Yahoo news and is not edited in any way.
Back to Furby News
Back to Furby Main
Back to Mystic Fortress