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Mattel cuts jobs, posts loss
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April 15, 1999: 10:58 a.m. ET
Toymaker also plans Internet venture; Hasbro 1Q earnings exceed consensus
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NEW YORK (CNNfn) - Mattel, the nation's largest toymaker, took some steps Thursday to break out of a recent slump, unveiling plans for an e-commerce initiative, a restructure that includes a 3,000 reduction in workforce and the closing of some facilities.
The steps came as Mattel and archrival Hasbro (HAS) reported first-quarter results that were slightly better than analysts expected.
Hawthorne, Calif.-based Mattel (MAT), the nation's largest in sales, says the restructuring and costs related to its merger with software publisher The Learning Company will result in a $300 million-$350 million pretax charge in the second quarter.
"We expect these combined actions to result in cost savings of approximately $50 million in 1999 and at least $400 million over the following three years," Jill Barad, Mattel's chairwoman, said.
Mattel also said it will spend $50 million on a new Internet marketing initiative. That initiative is expected to result in a subsidiary, and could lead to a public offering of part of it later this year.
Barad said its Internet presence will be enhanced by the acquisitions of The Learning Company, which is expected to be completed next month, and Pleasant Co., maker of the American Girl products.
"We will have an unprecedented portfolio of branded proprietary content and products that can be brought together at one 'Mattel.com' Web destination," she said. "We expect this strategy to result in over $60 million of e-commerce revenue this year, with gross margins that are greater than our traditional business."
Barbie and some friends
Mattel said it lost $17.9 million, or 7 cents a diluted share, in the quarter. That compares with earnings of $12.7 million, or 4 cents, a year earlier, and is just above the 8 cents a share loss consensus of analysts surveyed by First Call.
The company attributed 4 cents of the per share loss to goodwill amortization and interest costs related to the Pleasant Co. acquisition.
Sales declined 2 percent to $692.1 million. It attributed the decline primarily to unfavorable comparisons to the plush toy success of Tickle Me Elmo and Sing and Snore Ernie the year before, as well as to continued negative effect from the recall of about 10 million Power Wheels ride-in vehicles.
On the positive side, Mattel said Barbie sales rose 3 percent worldwide and 11 percent in the U.S. Fisher-Price sales were up 9 percent.
Hasbro, the No.2 toymaker, said first-quarter earnings rose to $13.8 million, or 7 cents a diluted share, from $7.8 million, or 4 cents, a year earlier.
The results exceeded the First Call consensus of 5 cents a share.
The spring edition of Furby
Revenue rose 38 percent to $668.4 million, bolstered by sales of its Furby and Talking Teletubbies dolls and its Hasbro Interactive computer games. The growth was aided by the acquisition of Tiger Electronics last April.
"Our earnings growth is especially gratifying in this seasonally low-revenue quarter, when we continue to incur fixed infrastructure costs including acquisition carrying costs," said Alan Hassenfeld, Hasbro's chairman.
Both Mattel and Hasbro point to anticipated strong showings in the second quarter from toys tied to new movies. For Mattel, it's the Disney animated feature "Tarzan." But for Hasbro, the bonanza is expected to be even bigger -- it's the master licensee for toys from the new "Star Wars" movie to be released in May.
Mattel stock was up 1-1/16 Thursday at 27. Hasbro shares were up 2-1/8 to 32-1/4.
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Mattel
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