By Sruthi Ramakrishnan and Subrat Patnaik
(Reuters) - Mattel Inc's (O:MAT) turnaround plan is off to a crawling start.
Higher sales of the company's Fisher-Price branded toys, aimed at infants and preschoolers, helped it post a surprise adjusted profit in its second quarter.
The company, which has been struggling with declining sales for the past seven quarters, is trying to revitalize its brands by introducing new toys, improving packaging and boosting online marketing.
Mattel is also selling toys at prices that are cheaper than they had been in the past two years as it tries to win back customers who have dumped the once must-have Barbie dolls and other staid toys for interactive electronic toys and tablets.
Fisher-Price, Mattel's second-largest business, is likely to continue to grow this year under new Chief Executive Christopher Sinclair, analysts said.
Sales of Fisher-Price products, including Thomas and Friends train sets and Baby Gear strollers, rose 9 percent in the quarter ended June 30, the first increase since 2012.
"They are putting the fun back into their toys," said Jim Silver, editor-in-chief of toys and sporting goods review website TTPM. He said Mattel was innovating more than it had in years.
The company has introduced fresh toys such as Beat Bo, a small robot-like DJ, and Blaze monster-truck, based on Nickelodeon's Blaze and the Monster Machine series.
"For 2015 the line is much better ... Some of their new baby items that they launched look almost Apple-esque."
Mattel partnered with Colombian popstar Shakira to design its First Steps line of toys and baby gear, launched last year, to boost the appeal of its products outside the United States.
It has stepped up advertising through YouTube, Facebook (NASDAQ:FB) and Instagram to reach out to young moms and introduced cradle-cum-swing sets that can be controlled through mobile apps.
"If you think about who's having babies today, not 40 year-old women, not Gen-Xers, (they are) 30 year-old women, millennials, very different mindset," Piper Jaffray analyst Stephanie Wissink said.
The company is building out its own distribution channels in Russia and China instead of depending on agents, and trying to boost its presence on Chinese social media, MKM Partners analyst Eric Handler said.
To be sure, the company has a long way to go.
Mattel's second-quarter net sales missed analysts' estimate, hurt in part by disappointing Barbie sales, dragging the company's shares down nearly 6 percent on Friday.
The company posted a loss on a net basis.
"Meh. We saw little in 2Q, a seasonally small quarter, that we think would change the mind of a bull or a bear," BMO Capital Markets analyst Gerrick Johnson wrote in a note.
" We think there is potential for a successful turnaround and for shares to be higher over the longer term."
