Mattel cost, inventory curbs outweigh wider loss

By Aarthi Sivaraman

NEW YORK (Reuters) - Mattel Inc MAT.N posted better gross margins on Friday as it kept a tight lid on costs and inventory in the first quarter, cheering investors to overlook a wider-than-expected loss for the period.

On the heels of a rough holiday sales season, Chief Executive Robert Eckert said Mattel would keep controlling costs as tough market conditions test the resilience of toy companies, which bank on indulgent parents to boost sales.

The world's No. 1 toymaker has already cut about 1,000 jobs and raised prices on its spring toys in the mid-single-digit percentage range as it works to boost results in 2010.

"We're operating in a sea of challenging economic news," Eckert said during a conference call, noting that "a lot" needs to happen before the 2009 holiday season for Mattel to regain its footing.

Mattel has built a worldwide campaign this year to turn the spotlight on its iconic Barbie doll's 50th year. Barbie sales have dropped over the years as girls' taste in toys change.

Steps such as a Barbie fashion show in New York, a six-story flagship store in Shanghai and special designs of Barbie dolls appear to be reaping some early benefits.

Worldwide Barbie sales fell 5 percent in the first quarter, less than Mattel's total sales decline of 15 percent. Barbie sales jumped 18 percent in the United States.

"Clearly, retailers have made room for Barbie in an otherwise difficult environment," said Wedbush Morgan Securities analyst Chris White. "Retailers have been persuaded that Barbie looks good enough to take a chance on."