Mattel Inc.'s (MAT) third-quarter earnings fell 3.5% amid a continued lack of consumer spending, detrimental foreign-exchange rates and a lack of entertainment-inspired toys.

Sales slid 8%, dragged particularly by worldwide sales for the company's entertainment business, which fell 15%. That was mostly because last year's results were boosted by toys related to movies including "The Dark Knight" and "Kung Fu Panda."

"As expected, revenues continue to be challenging this year due to the overall economic environment" said Chairman and Chief Executive Robert Eckert. "That said, we are continuing to make strong progress on reducing costs, rebuilding margins and generating strong cash flow."

The world's largest toy maker has recently succeeded in cutting costs, raising prices and controlling expenses during economic turmoil, swinging to a profit in the second quarter even as sales have slumped.

Mattel reported third-quarter earnings of $229.8 million, or 63 cents a share, down from $238.1 million, or 65 cents, a year earlier. Revenue fell to $1.79 billion.

Analysts polled by Thomson Reuters had forecast earnings of 63 cents on $1.78 billion in revenue.

Gross margin rose to 51.3% from 46.2% amid the cost cuts.

The company said Barbie sales fell 8%, Fisher Price slid 4% and American Girl fell 4%.

Mattel on Wednesday said it had agreed to settle a class-action lawsuit related to a 2007 recall of millions of toys that contained lead. The company didn't disclose the amount of the settlement, but said it had previously recorded charges to reserve for the litigation. Mattel said the final settlement won't be material to the company's operating results.

Shares closed at $19.58 on Thursday and didn't trade premarket. The stock is up 35% the past year.

-By Nathan Becker, Dow Jones Newswires; 212-416-2855; nathan.becker@dowjones.com