What happened

Shares of toy maker Mattel (MAT 2.40%) jumped on Friday despite a mixed first-quarter report. While the bottom line came in well short of analyst expectations, a smaller-than-expected revenue decline overshadowed the negatives. The stock was up about 8.5% at 10:40 a.m. EDT.

So what

Mattel reported first-quarter revenue of $708.4 million, down 3.7% year over year but about $14 million above the average analyst estimate. Excluding the impact of the Toys R Us bankruptcy, worldwide gross sales were up 2%. Sales of Barbie soared 24% year over year, while sales of Hot Wheels rose 15%. This growth was offset by an 8% decline in Fisher-Price and Thomas & Friends sales, and a 21% decline in American Girl sales. First-quarter revenue included a $30 million net sales reversal related to Toys R Us.

Toy airplane and cars next to a toy ramp.

A Mattel Hot Wheels set. Image source: Mattel.

Non-GAAP earnings per share were negative $0.60, down from a loss of $0.32 in the prior-year period and $0.21 below analyst expectations. The company lost $0.90 per share on a GAAP basis, with the discrepancy mostly due to $0.25 in per-share charges related to the Toys R Us bankruptcy.

Newly appointed Mattel CEO Ynon Kreiz is optimistic despite the Toys R Us headwind: "While Toys 'R' Us will present a near term challenge, our transformation plan remains our focus, as we work to deliver improved profitability and return Mattel to its leadership position as a high-performing toy company."

Now what

Shares of Mattel have lost two-thirds of their value over the past five years as the company's turnaround has dragged on. Strong sales of Barbie and Hot Wheels offer some hope that the worst is over, but the bottom line was still deeply negative during the first quarter, even excluding the impact of Toys R Us. Kreiz has a lot of work to do to return Mattel to growth and profitability.