No. 1 toy company Mattel Inc surprised Wall Street with a quarterly profit on strong demand for its classic brands and newer product lines, and its shares rose more than 3 percent.

The news came a week after top U.S. retailers posted a record rise in monthly same-store sales for March, fueling hopes that the U.S. economy had turned the corner.

Mattel, the maker of Barbie dolls and Hot Wheels cars, introduced a line of action figures based on popular World Wrestling Entertainment characters such as Triple H and The Undertaker earlier this year.

The company, whose rivals include U.S.-based Hasbro and Hello Kitty creator Sanrio Co Ltd <8136.T> of Japan, is also betting on new toys under the Thomas & Friends license and the Toy Story 3 movie franchise this year.

Even though people may have less money to spend, they know their budgets, BMO Capital Markets analyst Gerrick Johnson said. When they have a budget, they ... don't scrimp on the kids. They cut out elsewhere.

Mattel shares, which had nearly doubled in the past 12 months, rose 3.2 percent to $24.50 in premarket trading.

Mattel said its first-quarter net profit was $24.8 million, or 7 cents a share, compared with a year-earlier net loss of $51 million, or 14 cents a share.

Analysts on average were expecting a loss of 3 cents a share, according to Thomson Reuters I/B/E/S.

Net sales rose 12 percent to $880.1 million, boosted by both U.S. and international markets. The analysts' average estimate was $860 million.

While sales increased 5 percent for both Barbie and Fisher-Price brands, they rose 9 percent at Hot Wheels and 6 percent at American Girl.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)

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