updated 7/18/2005 2:30:39 PM ET 2005-07-18T18:30:39

Barbie was no match for Darth Vader during the second quarter.

Mattel Inc., the maker of Barbie dolls and Hot Wheels cars, reported a loss Monday due to a large tax expense related to the repatriation of foreign profits. But the force was clearly with rival Hasbro Inc., whose stock rose to a new 52-week high Monday after it reported its profit soared 56 percent, helped by a strong performance from “Star Wars” products.

Excluding the tax charge, Mattel’s results still missed analysts’ projections as the world’s largest toy maker continues to struggle with weak sales of Barbie. But results from Hasbro, the No. 2 toy maker, beat Wall Street projections.

“From what I hear from retailers, 'Star Wars' (products) did better than expectations,” said independent toy consultant Chris Byrne. “Barbie is in transition.”

But Byrne added that the real test in the battle for toy sales will be from Oct. 1 through Christmas Eve, when up to 70 percent of annual toy sales are generated.

“I’m very excited about all the innovation coming from both Hasbro and Mattel,” Byrne said, but he warned that the industry continues to struggle with higher production costs amid higher oil prices.

Mattel’s loss in the second quarter totaled $94 million, or 23 cents per share, compared with net income of $23.5 million, or 6 cents per share, in the second quarter a year ago.

The loss reflects a tax expense of $112.9 million, or 28 cents per share, related to the company’s decision to return foreign profits of about $2.4 billion to the United States under a 2004 law that allows corporations to do so at a reduced tax rate.

Excluding the tax charge, the El Segundo-based company’s earnings were 5 cents per share.

Sales at Mattel increased 10 percent to $886.8 million from $804 million, with 2 percentage points of the increase coming from favorable foreign-currency translation. Sales rose 9 percent in the U.S. and 11 percent overseas, including a benefit from currency exchange rates of 5 percentage points.

Analysts surveyed by Thomson Financial were expecting the company to earn 7 cents per share, excluding extraordinary expenses, on sales of $829.4 million.

Sales at Mattel’s Fisher-Price segment, which includes the Fisher-Price, Little People and Rescue Heroes brands, rose 7 percent to $337.3 million.

The company’s stock has fallen about 10 percent from the 52-week high of $21.64 reached in April, as investors grow concerned about weak sales of the Barbie and Hot Wheels toys.

Worldwide gross sales for the Barbie brand fell 4 percent, as its struggles with competition from Bratz dolls from privately held MGA Entertainment Inc. Meanwhile, gross sales for Hot Wheels, Matchbox and Tyco R/C brand cars increased 4 percent. A rise in sales of “Batman” merchandise helped boost sales in the company’s entertainment segment by 27 percent.

“We still have a lot of work to do on Barbie and the competitive environment will continue to be challenging,” Robert A. Eckert, Mattel’s chairman and chief executive, said Monday during a conference call with analysts.

But he noted, “Barbie is still the No. 1 brand this year despite the success of things like ’Star Wars’ and ’Batman.’ We see a lot of action continuing on ’Batman’ throughout this fall and into next year.”

Gross sales of the company’s American Girl products, which are sold directly to consumers, rose 20 percent.

Eckert said overall sales trends were favorable, but warned of rising production costs.

“Our margins continue to be under pressure, particularly from higher oil prices,” Eckert said.

Hasbro’s second-quarter net income grew to $29.5 million, or 13 cents per share, from $18.8 million, or 6 cents per share, a year earlier. Revenue climbed 11 percent to $572.4 million from $516.4 million, boosted by $9.1 million from favorable currency exchange rates.

Analysts expected Hasbro to earn 8 cents per share on $542.4 million in revenue during the three months that ended on June 26.

Toy revenue rose 25 percent on strong results from “Star Wars” toys as well as other brands including Nerf, Transformers, My Little Pony and Littlest Pet Shop. In contrast, the company’s games segment revenue fell 12 percent, due mainly to a decline in trading card games and higher seasonality of board game shipments.

“Our second-quarter performance reinforces the confidence we have in our ability to achieve our full-year financial goals, however, it’s important to keep in mind that there is still a lot of business to be done in the back half of the year,” said Alfred J. Verrecchia, president and chief executive of Hasbro.

“Star Wars Episode III — Revenge of the Sith” was released on May 19 and Verrecchia said sales of related products appear stronger than in 1999 and 2002, when the prior two “Star Wars” movies were released.

“We have the all-important fourth quarter and DVD,” he said. “It’s looking good, but time will tell.”

Verrecchia said the company is responding to analysts’ concerns that stores may run low on “Star Wars” items. “The pipeline is being filled now,” he said.

Game sales fell to $142.9 million for the quarter, compared to $161.6 million a year ago. Hasbro said the decline came mostly from the Duel Masters and Magic trading card games. Verrecchia said the popularity of poker has taken a bite out of Hasbro’s card business, but not its board game sales.

Executives told investors that Hasbro is finalizing plans to repatriate $500 million to $550 million in overseas earnings and expect Hasbro will pay between $35 million and $45 million in taxes, depending on the amount of money repatriated.

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