Mega Brands prepares for early sale of its new Barbie construction toy

MONTREAL – Mega Brands is hoping to earn some pre-Christmas buzz by launching a sample of its new Barbie construction toy line in select North American retailers weeks ahead of schedule.

Some of the Barbie line will hit Toys “R” Us and Wal-Mart store shelves on Dec. 12 — a catchy and numerically unique date in 2012. A more comprehensive North American roll-out will occur in the first quarter of 2013, followed by international sales in the second quarter.

“Based on the strength and the appeal of the Barbie and Skylanders franchises we see a bright future for these two product lines as part of the Mega Bloks family into 2013 and well beyond,” CEO Marc Bertrand said Thursday in a conference call about third-quarter results.

He said the company is excited about Barbie blocks because most retailers will add it to shelf space in the toy aisle geared towards girls and join its Little Princess and Hello Kitty toys.

The Montreal-based toy company beat expectations after reporting that its net income in the third quarter increased 14 per cent on a double-digit growth in North American toy sales.

Mega Brands, which reports in U.S. dollars, said it earned US$19.5 million for the period ended Sept. 30, up from $17.1 million a year earlier.

On a per-share basis, Mega Brands (TSX:MB) earned 65 cents per diluted share or $1.19 per basic share. That compared with 51 cents and $1.04 respectively a year earlier.

Excluding one-time items, it earned 65 cents per share, above the 57 cents per share forecasted by analysts.

Revenues increased to $140 million from $133.3 million in the third quarter of 2011 but were less than the $145 million expected by analysts.

Toy sales grew by five per cent, with higher product shipments in the preschool and boys construction categories. Toy sales have increased year-over-year in 11 of the last 12 quarters.

Stationery and activities sales increased three per cent, marking the sixth consecutive quarter of growth.

North American sales rose 19 per cent, more than offsetting lower international shipments. International sales fell 15 per cent to $46 million and were impacted by an 11 per cent decline in the value of the euro and challenging economic conditions.

“The improvement in our financial performance during the first three quarters has been achieved in an uncertain economic environment in both North America and across Europe. The construction category continues to be among the top performers in the toy industry and both our pre-school and boys offerings are finding favour with retailers and consumers.”

Gerrick Johnson of BMO Capital Markets said the results were a little lighter on sales than he was expecting, but were overall solid.

“I think most investors holding this stock right now are in it for a longer-term kind of turnaround and the results were solid in a difficult environment so I think any of those investors would be pleased,” he said from New York.

The analyst said Mega Brands’s decision to push up sales of Barbie in time for the lucrative holiday shopping period is a smart move from a public relations perspective even though the bulk of sales won’t begin until the new year.

“It’s going to be a good product, the response so far has been really, really good. All retailers seem to be on board and like it.”

Neil Linsdell of Industrial Alliance Securities expects Barbie blocks will be one of the biggest products launches in Mega Brands history.

“It is also comforting to see this product availability ahead of schedule, as a testament to both Mega Brands’s ability to bring new products to market quickly, and to the high level of interest from retailers,” he wrote in a report.

The Skylanders Giants line has already begun to ship and should be on store shelves soon. Christmas demand is expected to be strong for Halo 4 toys following the Dec. 6 launch of Microsoft’s latest video game. Hot Wheels and StarCraft construction toys are expected to follow next fall.

Mega Brands designs, manufactures and markets toys and stationery products in more than 100 countries. It has some 1,300 employees with offices, manufacturing facilities and distribution centres in 14 countries.

On the Toronto Stock Exchange, Mega Brands shares gained two cents to close at C$9.75.