By Aarthi Sivaraman
NEW YORK (Reuters) - Investors feared that even hot toys in the key holiday season may not mean success for top U.S. toymakers Mattel Inc
Mattel, home to Barbie and Elmo, posted disappointing third-quarter results on Monday, while Hasbro, maker of the Monopoly game, topped Wall Street views.
Shares in both traded lower, with Hasbro down 8 percent and Mattel slipping 5 percent despite a wider market rally. Toymakers had been seen as more protected from an economic downturn during the critical holiday shopping season, but some analysts say that may change with this year's financial turmoil.
"We're experiencing what is likely the worst economic crisis of my generation," Mattel Chief Executive Bob Eckert said during a conference call.
Hasbro CFO David Hargreaves warned that he expects the remainder of the year to be "very challenging."
"We do not believe we will be unaffected and we are adjusting our expectations and spending plans accordingly," Hargreaves said during Hasbro's conference call.
Hasbro CEO Brian Goldner sought to reassure people, saying "we still believe that Christmas will come for consumers and retailers this year,"
But analysts took little optimism from the remark. Hasbro "certainly suggests that Q4 may not be as strong as we had expected," Sterne Agee analyst Margaret Whitfield said, adding she was revising expectations.
Hasbro has been favored by investors this year, with its stock up about 9.5 percent since January, while Mattel's shares are down nearly 27 percent.
"The big reason why the stock is down so much today is for the first time in a while, the company gave cautious commentary about the future," Wedbush Morgan Securities analyst Chris White said of Hasbro.
FURTHER PRICE INCREASES
Toy companies typically derive a large chunk of their annual sales during the holiday season, which can account for up to 40 percent of annual revenue for retailers.
This year for example, Mattel's Elmo Live at almost $60 and Hasbro's toy pup Biscuit at nearly $180 are predicted to be among the top toys by industry experts.
But holiday sales are expected to be lackluster this year, as shoppers cut spending and seek out bargains due to the financial crisis, higher costs and a housing slump.
Mattel, which also owns such brands as Hot Wheels, posted a third-quarter net profit of $238.1 million, or 66 cents per share, compared with $236.8 million, or 61 cents per share, a year earlier.
Analysts, on average, had expected a profit of 71 cents per share, according to Reuters Estimates.
Sales rose 6 percent to $1.95 billion, with currency benefits accounting for 2 percentage points of the gain.
Worldwide gross sales for the Barbie doll line fell 1 percent, but that performance should be viewed positively after a 6 percent drop in the prior quarter, Wachovia Capital Markets analyst Timothy Conder said in a note.
Mattel faces issues like high costs for a court battle with MGA Entertainment over rights to the Bratz dolls, strict product testing after a huge toy recall last year and costs for commodities like plastic resin.
The company said price increases it took earlier this year were not enough to compensate for higher costs, and it was likely to increase prices on its toys in 2009.
HASBRO BEATS
Hasbro's net profit fell to $138.2 million, or 89 cents per share, from $161.6 million or 95 cents per share a year earlier. Analysts had expected a profit of 86 cents per share.
Hasbro's sales rose about 6 percent to $1.3 billion, helped also by demand for its card and board games, as more consumers shun vacations and seek cheaper ways to entertain themselves at home.
Hasbro said it will study the need to raise prices as costs for input materials like oil come down. The company expects to raise prices in Europe as exchange rates prove to be a disadvantage.
Hasbro said the current credit crunch is not affecting its liquidity. It ended the quarter with $356.5 million in cash.
Mattel's shares were down 71 cents to $13.74 after falling to $13.54 earlier. Hasbro's shares were down $2.55 to $27.57, but fell as low as $27.37 earlier in the session.
(Editing by Gerald E. McCormick and Derek Caney)
