Mattel Inc beat quarterly revenue expectations on strong demand for its mainstay Barbie dolls, and its shares rose 3 percent.
Still, net income at the No. 1 toy company fell 33 percent due to higher expenses for items like resin.
The results echoed those from smaller rival Hasbro Inc, which also reported a huge drop in profit due to higher costs, but beat sales estimates in the seasonally weak first quarter.
Both companies are paying more for fuel, resin and freight, as well as fighting higher labor costs in China, where most of their toys are made. Hasbro has also been spending on its new television channel.
Mattel and Hasbro have said they will raise prices this year to offset costs.
Mattel has also been spending a lot on litigation costs in its long-running copyright lawsuit against rival MGA Entertainment Inc over the popular Bratz dolls. A verdict on the case is expected soon.
Wells Fargo analyst Tim Conder said he expected Mattel shares to benefit from legal clarity over the next few months and recommended the stock to investors in the leisure space.
Mattel's statement on Friday did not give a specific figure on the legal costs, but many analysts were expecting them to weigh on first-quarter results.
Net income fell to $16.6 million, or 5 cents a share, from $24.8 million, or 7 cents a share, a year earlier. The earnings met the analysts' average estimate, according to Thomson Reuters I/B/E/S.
Sales rose 8 percent to $951.9 million, well ahead of the analysts' average estimate of $903.7 million.
Sales rose at all units except the ailing Fisher-Price pre-school toy business, which was down 2 percent.
Global sales for Barbie were up 14 percent. Demand was strong for the Monster High and Disney Princess doll lines as well.
Shares of Mattel were up 3 percent at $26.50 in trading before the market opened.
(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)