Mattel Inc. (MAT), the world's largest toymaker, said Friday that first-quarter earnings slumped nearly 28 percent from a year ago on nearly flat sales weighed down by declines in its Barbie brand and its toy car business that includes Hot Wheels (search).

Net income fell to $6.5 million, or 2 cents per share, for the three months ended March 31 from $9 million, or 2 cents per share, a year ago.

Sales were $783.1 million versus $780.9 million last year, which included a benefit from changes in currency exchange rates of 2 percentage points.

Analysts surveyed by Thomson Financial were looking for the company to post earnings of 3 cents per share on sales of $804.3 million in the latest quarter.

"Following last year's encouraging holiday season, our early 2005 results were disappointing," said Robert A. Eckert, chairman and chief executive officer. "We will be adjusting programs for the balance of the year with the goal of continuing to build market share and improving financial performance."

On a regional basis, first-quarter gross sales decreased 5 percent in the U.S., and were up 6 percent in international markets, which included a benefit from changes in currency exchange rates. Global gross sales for the Mattel Brands business unit fell 3 percent at $514.4 million, with Barbie brand sales down 15 percent.

Worldwide gross sales for the Wheels category, which includes the Hot Wheels, Matchbox and Tyco R/C brands, were down 5 percent, but sales for the Entertainment business, which includes Games and Puzzles, were up 18 percent due to higher sales in male-action entertainment properties.

First-quarter gross sales for the Fisher-Price Brands (search) business unit were flat at $264.4 million, reflecting strong growth in Fisher-Price Friends worldwide and core Fisher-Price internationally, offset by declines in shipments of core Fisher-Price in the U.S., despite strong performance at retail.

Over the course of this year, Mattel expects to repatriate up to about $2.4 billion in foreign earnings, and estimates that this will result in a tax liability of about $180 million, which will be included in the second-quarter income tax provision.