Mattel Doesn't Play Around

Even when toy sales are the furthest thing from shoppers' and retailers' minds, Mattel (NYSE:MAT) still knows how to impress. The toymaker greeted investors with a profitable surprise for the March quarter, earning $0.03 per share on a 19% surge in worldwide sales.

Yes, Mattel also earned a profit during the same period a year ago. However, that first-quarter report was spiked with a one-time tax benefit. Absent the gain, Mattel would have been in the red for the quarter. This morning's profit is the real deal, jolting analysts braced for a $0.05-per-share loss.

Like most toymakers, Mattel's financials are practically inconsequential during the first half of the year. It isn't until the third quarter that retailers start stocking up for the holidays and rivals like Hasbro (NYSE:HAS), Jakks Pacific (NASDAQ:JAKK), and LeapFrog (NYSE:LF) earn their keep. But we can learn a lot from a seasonally insignificant period. In fact, the strength of Mattel's flagship brands should encourage investors as we head deeper into 2007.

Worldwide sales for Barbie, Hot Wheels, and Fisher-Price were all up. Barbie sales dipped domestically, but that weakness was more than offset by strength overseas. Sales were generally better abroad for Mattel, even if you adjust for the weak dollar relative to most foreign currencies.

Barbie has been a question mark in the Mattel portfolio lately. Edgier dolls like Bratz -- and to a lesser extent, Build-a-Bear's (NYSE:BBW) Friends 2B Made and Mattel's own Polly Pocket, American Girl, and Disney (NYSE:DIS)-licensed Princess lines -- have nibbled away at Barbie's reign. This is actually the third consecutive quarter of global gains for Barbie, but the stateside weakness is something to keep watching. Before Barbie's recovery in last year's September quarter, worldwide Barbie sales had dipped for more than three years.

As diversified as Mattel is these days, one shouldn't lose sight of key brands like Barbie and Hot Wheels, which have driven the company's fortunes for decades. Holiday hits like Tickle Me Elmo or the success of Disney-licensed Cars toys are great bottom-line boosters, but the gains are often temporary.

Mattel has now soundly beaten Wall Street's expectations for four consecutive quarters, earning the market's respect. So go ahead and applaud if you want to. Mattel deserves it. However, do yourself a favor and keep an eye on Barbie.      

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Longtime Fool contributor Rick Munarriz wonders who will have the hot toys for the 2007 holiday season. He does own shares in Disney. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.