Mattel Makes the Grade

It's no secret times are tough for toys these days. For now, toy maker Mattel (NYSE:MAT) has bucked that trend, reporting improved second-quarter earnings. However, trouble on the horizon includes weakness in the company's quintessential Barbie brand.

Second-quarter earnings at Mattel improved 12% to $23.5 million, or $0.06 per share. Mattel eked out a 4.6% gain in revenues, to $804 million. Despite the good showing, the company admitted the climate remains challenging.

For many of us grown-ups, thinking of toys for girls might very well bring Barbie to mind. She played a part in many a little girl's childhood. Despite the doll's longevity (she's been around since 1959), sales of Barbie products, which have been weak of late, decreased by 13% in the second quarter.

Taking Barbie out of the picture, other stalwart brands Mattel provides include Fisher-Price, Hot Wheels, and American Girl, all of which saw better fortunes, with Hot Wheels showing particular strength, with a 37% increase in global sales. Mattel also said it had some success from sales of Harry Potter-related toys, surely boosted by the summer release of The Prisoner of Azkaban.

Today's showing by Mattel beats that of Hasbro (NYSE:HAS), which, as Fool contributor Phil Wohl noted last week, wobbled like its Weebles as it reported some disappointing numbers. What with several major toy stores' bankruptcies and aggressive price cuts from top toy purveyor Wal-Mart (NYSE:WMT), these are tough times for toys indeed.

Mattel's initiatives include bringing Barbie back into popularity (one might hope that it might come up with alternatives other than a Barbie-branded adult clothing line, an opinion I made known recently). Mattel also hopes to strengthen its electronic learning products, which seems a wise move considering modern kids' far more technological leanings and parents' interest in stimulating young minds.

Earlier this morning, shares of Mattel increased as much as 8% on the earnings news as investors glossed over what the company still called a challenging year ahead. It is heartening that strength in other brands made up for Barbie issues. However, what with the troubles in toyland and the possibility that Barbie needs the sales equivalent of a shot of Botox, such euphoria may be a bit premature.

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Alyce Lomax does not own shares of any of the companies mentioned.