- The Washington Times - Thursday, March 19, 2009

NEW YORK (AP) - An analyst lowered his expectations for Mattel Inc.’s fiscal 2009 results on Thursday due to the strengthening U.S. dollar and continuing weakness in retail toy sales, which has cut into demand for new shipments early this year.

Needham & Co. analyst Sean McGowan maintained a “Strong Buy” rating on the stock, but cut his price target to $20 from $21.

McGowan said he believes most toy retailers ended 2008 with excess inventory, which will slow demand for shipments from Mattel in the first quarter of 2009.

“While we certainly did not expect a sharp increase in sales year-over-year, we now believe that retail sales in (the first quarter) have been weaker than expected, curtailing first-quarter shipments of new products from vendors,” McGowan said.

McGowan reduced his fiscal 2009 earnings forecast to 85 cents per share from $1.05.

Analysts polled by Thomson Reuters predict 2009 profit of $1.11 per share.

McGowan said he continues to expect double-digit sales growth in 2010, although he reduced his earnings forecast to $1.50 per share from $1.60. For 2011, he expects earnings of $1.67 per share.

Analysts predict earnings per share of $1.34 in 2010 and $1.24 in 2011.

McGowan named a number of catalysts he expects will boost sales in 2010 like the elimination of the Bratz line of dolls, which has been a strong rival for Mattel’s Barbie. A jury has found that Bratz doll designer Carter Bryant developed the concept for the dolls while working for Mattel. Entertainment Inc. must eventually stop selling the dolls.

He said the company will also benefit from its license to make toys based on Disney/Pixar’s Toy Story 3 film _ due out in mid-2010 _ and the appearance of Barbie and Ken characters in that movie.

He noted that Mattel licenses to sell both WWE and Thomas and Friends toys also begin in 2010.

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