By Granth Vanaik

July 23 (Reuters) - Mattel ( MAT ) beat Wall Street

estimates for second-quarter profit on Tuesday, aided by the

toymaker's tight cost controls while posting a surprise drop in

sales.

The Barbie maker has set a target of saving $200 million in

costs by 2026 through initiatives such as streamlining its

supply chain and plans to exit or out-license underperforming

product lines.

Along with falling inventory management and input expenses,

the efforts helped gross margins climb 410 basis points to 49.2%

in the quarter.

The Hot Wheels maker's adjusted profit of 19 cents per share

beat estimates of 17 cents, according to LSEG data.

Net sales fell 1% to $1.08 billion, amid a shift among

consumers to spend more on experiences and services. Analysts

had projected a marginal rise to $1.10 billion.

The company, which maintained its full-year profit and sales

forecasts, also posted a drop of 18% in advertising and

promotional expenses.

This comes as monthly sales report from Costco

suggested a pickup in demand for toys since April.

Mattel ( MAT ) CEO Ynon Kreiz said the company was well-positioned

for the second-half, with new product innovation and increased

retail support.

"We do expect the toy industry to decline modestly in the

year, but this is an improvement from our outlook at the start

of the year ... And based on our internal research, we're seeing

that consumers are planning on purchasing toys this holiday

season," Kreiz added.

Meanwhile, Reuters reported on Monday that buyout firm L

Catterton had approached Mattel ( MAT ) with an acquisition offer. The

move could also prompt other suitors, including rival Hasbro ( HAS )

, to consider bids, the report said.

Kreiz reiterated on Tuesday he was confident in the

company's strategy to create long-term shareholder value as

standalone company.

Mattel ( MAT ) has struggled since the blockbuster commercial

success and acclaim of the Barbie movie boosted sales last year.