Mattel (MAT)

Q3 2011 Earnings Call

October 14, 2011 8:30 am ET


Bryan G. Stockton - Chief Operating Officer

Drew Vollero -

Kevin M. Farr - Chief Financial Officer

Robert A. Eckert - Chairman, Chief Executive Officer and Member of Equity Grant Allocation Committee


James Hardiman - Longbow Research LLC

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Gregory R. Badishkanian - Citigroup Inc, Research Division

Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division

Gerrick L. Johnson - BMO Capital Markets U.S.

Sean P. McGowan - Needham & Company, LLC, Research Division

Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division

Michael Kelter - Goldman Sachs Group Inc., Research Division

Robert W. Carroll - UBS Investment Bank, Research Division



Good day, ladies and gentlemen, and welcome to Mattel's Third Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Drew Vollero, Senior Vice President of Corporate Strategy and Investor Relations. Please go ahead.

Drew Vollero

Thanks, operator. As you know, this morning, we reported Mattel's third quarter financial results. As we did with our second quarter call, we have provided you with a slide presentation to help guide our discussion today.

In a few minutes, Bob Eckert, Mattel's Chairman and CEO; Bryan Stockton, Mattel's Chief Operating Officer; and Kevin Farr, Mattel's CFO, will provide comments on the results, and then the call will be opened for your questions.

Certain statements made during the call may include forward-looking statements related to the future performance of our overall business. These statements are based on currently available information, and they are subject to a number of significant risks and uncertainties, which could cause our actual results to differ materially from those projected in the forward-looking statements.

We describe some of these uncertainties in the Risk Factors section of our 2010 annual report on Form 10-K, in our 2011 quarterly reports on Form 10-Q and in other filings we make with the SEC from time to time. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so. The slide presentation and the information required by Regulation G regarding non-GAAP financial measures is available on the Investors & Media section of our corporate website,

Additionally for your reference, we have added quarterly and annual revenue growth trends to the other information that is also available at

Now I'd like to turn the call over to Bob.

Robert A. Eckert

Thank you, Drew, and good morning, everyone. In anticipation of the question I'm asked most during this time of year, yes, there will be a Christmas, and Mattel toys will be under the tree, and we'll likely sell more toys than anyone else. As we move into the all-important holiday season, toy industry gurus, as well as our retail customers have named Mattel and Fisher-Price toys to their must-have holiday toy lists, including Hot Wheels Wall Tracks; Fijit Friends; Barbie Designable Hair Extensions; Hot Wheels Video Racer; Fisher-Price Laugh & Learn Apptivity Case, which lets toddlers enjoy their very own apps while protecting mom or dad's iPhone or iPod; the Fisher-Price Kid-Tough See Yourself Camera; and Rock Star Mickey. In fact, Fijit is listed on all the top retailer lists, including Walmart, Target, Toys"R"Us, Kmart and Tesco, where it hit #1.

I'm also pleased with our record operating performance in the quarter. We continue to experience strength across our portfolio of brands in all regions of the world. Not only have we continued to benefit from the strength of our core brands, but this year's big entertainment property, Cars 2, is also fueling momentum.

Our girls portfolio is the strongest we've had in years, including Barbie, which boasted its highest percentage gain in more than a decade. The brand is performing well worldwide across all product platforms from Fashionistas to family to fairytale. Additionally, Barbie's fall entertainment offering, Princess Charm School, is performing well versus last year and will be broadcast this November on Nickelodeon, leading into Thanksgiving weekend. We're also releasing an incremental holiday-themed Barbie DVD, A Perfect Christmas, which will hit store shelves in November.

Monster High continues to perform exceptionally well on a global basis across every major product category. And it's not just a toy brand, but it's also a consumer franchise with strength that lies in its deep and rich content, which continues to drive engagement for our fans. continues to be an effective way to connect with girls, boasting 33 million visits since the website launched. We recently launched a Monster High app and a global Facebook page with localized content for our top markets. The Monster High THQ video game will debut on October 25 in more than 10 international markets. And in time for Halloween, Nickelodeon will air another Monster High Halloween TV special on October 30.

For American Girl, its 25th anniversary has been a great success. My AG continues to show strong growth as we approach the anniversary of the relaunch. The 2011 Girl of the Year, Kanani, is pacing to be the best-selling Girl of the Year of all time. In addition, we opened 2 new stores: Seattle and Washington, D.C., and both are performing quite well. And just this week, we revealed St. Louis as the location for our 12th American Girl store, which is scheduled to open in spring 2012.

In the boy's aisle, the overall marketing program behind team Hot Wheels has been strong with millions of consumers engaging with the content. Hot Wheels Wall Tracks and Hot Wheels Video Racers' break frame innovation is resonating with retailers and consumers, especially moms. The Cars 2 business continues to be strong, specifically, die-cast cars, play sets and track sets, and is on track to deliver our best-single-sales year globally for the brand. And we know from experience and research that about 40% of the target audience has not yet seen Cars 2 but will see it once the DVD is released in early November. For its part, Disney continues to support the franchise as an evergreen brand through the planned release of new Cars Toon animated shorts in 2012, leading up to the planned release of Planes, an all-new direct-to-video in 2013.

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