Mattel Dragged Down by Weak Barbie Sales
Investors might be calling Mattel Inc.’s biggest product Bad News Barbie.
Poor sales of the El Segundo-based toy maker’s iconic doll dragged down net income 12% in the third quarter, Mattel said Monday. The company said it earned $225.3 million, or 55 cents a share, for the three-month period ended Sept. 30, down from $255.8 million, or 61 cents, a year earlier.
In response, investors sent Mattel’s stock down 72 cents to $15.23, its lowest point in nearly five years.
“Sales increases in much of our portfolio were offset by declines in the Barbie brand,” said Chairman and Chief Executive Robert A. Eckert. “Overall, we continue to experience the effect of a difficult retail environment as well as cost increases.”
Barbie, the company’s biggest brand, suffered a 30% sales drop in the United States and 8% decline worldwide in the third quarter compared with the same period a year earlier.
The company’s other categories mostly fared far better in the third quarter, with worldwide sales of its Wheels products up 4%, Fisher-Price Brands infant products up 6% and American Girl dolls up 12%.
Still, because of Barbie’s importance to the company, overall sales were $1.67 billion, flat with the same period a year earlier.
“The company is still facing significant challenges -- it’s doing a lot of things right, just not the one thing it needs to do,” said toy industry analyst Sean McGowan of Harris Nesbitt in New York, who rates the stock “neutral.”
“It’s hard for this company to meet its own growth goals and the expectations of investors if Barbie is this weak. It doesn’t have to be up; it just can’t be down this much,” McGowan said.
Mattel stated several reasons for its most recent woes. Eckert cited margin pressures as a result of higher raw material, transportation and royalty costs as well as increased sales of lower-margin products.
And in a conference call with investors before the market opened Monday, Eckert also blamed retailers’ paring back of Barbie’s shelf space and reducing inventories of the doll.
Barbie, which has had flat or lower sales in 17 of the last 19 quarters, has suffered at the hands of the Bratz dolls from MGA Entertainment Inc. of Van Nuys. The pouty-lipped fashion dolls with exaggerated features and risque attire have increasingly siphoned sales from Barbie, particularly among older girls.
Financial analysts had been awaiting bad news about Barbie since early last week, when Mattel announced a management shake-up. The company replaced Mattel Brands President Matthew Bousquette, whose responsibilities included Barbie, with Fisher-Price leader Neil B. Friedman, who would oversee an expanded division that combines toys for girls, boys and infants.
But any changes Friedman might bring to Mattel’s top doll won’t come in time for this year’s crucial holiday season, McGowan said.
“Barbie will have its worst year in over a decade, and the company will not meet last year’s earnings,” McGowan predicted. “The company may eke out an increase in revenue, but they’ll earn less money. It would be a lot easier to handle the cost pressures if its most profitable product line is up.”
Also Monday, Hasbro Inc., the nation’s No. 2 toy maker, said its third-quarter profit rose 3.8% on the strength of its “Star Wars” action figures and board and electronic games.
