Pedestrians walk past a Toys “R” Us Inc. store in New York, U.S. (Photographer: Peter Foley/Bloomberg)

Mattel's Barbie Brand Carries Quarter, Mutes Toys `R' Us Effect

(Bloomberg) -- Barbie’s back in town.

Mattel Inc., which named a new chief executive last week, softened the effect of Toys “R” Us Inc.’s demise as its all-important doll brand posted the best growth on record.

Shares rose as much as 9.4 percent to $15.30 on Friday, the biggest intraday gain since Feb. 2. The stock had plummeted 38 percent in the past year ahead of the earnings release.

When excluding $30 million of sales lost in the liquidation of Toys “R” Us, Mattel’s revenue rose 2 percent, fueled by the toymaker’s biggest brand. Barbie’s sales surged 24 percent, marking the second straight gain after a rough stretch and the best quarter since at least 2009, when it started breaking out the numbers.

“We’re off to a strong start,” Joe Euteneuer, chief financial officer, said in an interview. Getting to sales growth of 2 percent, excluding Toys “R” Us, is a “big deal, given where we were last year.”

Mattel's Barbie Brand Carries Quarter, Mutes Toys `R' Us Effect

Barbie’s strength helped Mattel’s biggest properties -- which also include Hot Wheels, Fisher-Price and Thomas & Friends -- grow a combined 2 percent during a quarter when the world’s largest toy-store chain announced the shuttering of operations in the U.S. and U.K.

“Barbie and Hot Wheels are just flying off the shelves,” Euteneuer said. “We’re spending more time trying to figure out how to manufacture more.”

Mattel’s results may offer investors a brief reprieve after years of sagging sales and multiple management changes. Ynon Kreiz, who officially became chief executive officer on Thursday, replaced Margo Georgiadis in the top role after just 14 months. She did make a slew of changes, however, including shaking up the executive ranks. She also killed off struggling brands and shifted resources toward its biggest properties, which appears to be paying off.

Near-Term Challenge

The company’s adjusted loss was 60 cents a share, excluding some items mostly tied Toys “R” Us. Analysts had projected a loss of 40 cents. Mattel also reported bad debt expense tied to the retailer of $57.3 million.

“While Toys ‘R’ Us will present a near-term challenge, our transformation plan remains our focus,” Kreiz, a board member since June who’s also slated to become chairman next month, said in a statement. “We continue to see strong momentum in our key power brands.”

Mattel took the biggest hit from Toys “R” Us in North America, where sales fell 5 percent, but Euteneuer said he expects the impact to lessen this quarter. Last week, rival Hasbro reported a 19 percent drop in the region.

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