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Mattel stock plunges after holiday sales disappoint

Mattel
Mattel headquarters in El Segundo in 2007.
(Reed Saxon / Associated Press)

Shares of Mattel Inc. plunged nearly 18% on Thursday after the toy maker reported disappointing holiday sales.

Chief Executive Christopher Sinclair acknowledged that it was a “very difficult quarter” for Mattel. The El Segundo company’s fourth-quarter results, which it posted after financial markets closed Wednesday, fell well short of Wall Street expectations.

In a call with analysts, Sinclair cited a “significant decline in industry sales growth,” particularly in the U.S., among factors weighing on Mattel’s numbers.

Sinclair’s days at the company’s helm are numbered: Google executive Margaret Georgiadis is taking over as CEO on Feb. 8.

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Sinclair noted Georgiadis’ tech background as a major plus for the company as toymakers increasingly try to attract digital-savvy children.

“We’ve made some investments in technology,” he said in the call. “We’re kind of working our way into it, but I think she can help us prioritize, streamline and accelerate those.”

Slower sales in the overall toy category led to heavy discounts, said Richard Dickson, the company’s president.

“While the consumer did come out the last two weeks of December, aided by additional shopping days, it simply was not enough to offset the overall unfavorable holiday trends,” Dickson said during the call with analysts.

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Worldwide gross sales in the category that includes Disney Princess and Monster High items was down sharply — 41% last quarter and 52% for the full year — although a sales increase in the category that includes Hot Wheels offset that pain somewhat, the company said. That category was up 6% for the quarter and 13% for the year.

Mattel’s iconic Barbie line saw a better year, with worldwide gross sales for 2016 up 7% from the year before. A year ago, the company introduced different body types for the doll — petite, curvy and tall — to try to appeal to a wider audience.

“Clearly Barbie is on the right track,” Dickson said.

Barbie’s quarterly sales, however, were down 2% from the year-earlier quarter.

The company has also tried to rejuvenate its American Girl brand by introducing a cheaper line of smaller dolls called WellieWishers, and by opening American Girl mini-shops inside many Toys R Us locations to attract new customers.

Fourth-quarter sales of American Girl toys were up 4% from the same quarter a year earlier, but full-year sales ended up flat.

Mattel’s stock slid 17.6% on Thursday to $25.99. 

Stephanie Wissink, senior research analyst at Piper Jaffray, said “visibility into [Mattel’s] improvement is hazy.”

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“Investments in innovation have lagged, and cost restructuring programs will continue in order to offset product margin weakness,” she said in a Thursday note to clients. “While Barbie was enough to support sentiment in 2016, we think a broader base of drivers is needed to justify buying the stock.”

Mattel reported fourth-quarter profit of $173.8 million, or 50 cents a share. Adjusted for restructuring costs, earnings were 52 cents a share.

The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of 71 cents a share.

The company reported revenue of $1.83 billion in the period. Six analysts surveyed by Zacks expected $1.98 billion.

For the same quarter a year earlier, Mattel earned $215.2 million, or 63 cents a share, on revenue of just under $2 billion.

For the full year, the company reported profit of $318 million, or 92 cents a share, on revenue of $5.46 billion.

The Associated Press was used in compiling this report.

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UPDATES:

2 p.m.: This article was updated with Mattel’s closing stock price.

10 a.m.: This article was updated to include analyst comment and a more recent stock price.

9:25 a.m.: This article was updated with a more recent stock price. 

Jan. 26, 8:10 a.m.: This article was updated with details of executives’ call with analysts, Mattel brands’ sales and the company’s recent moves.

This article was originally published Jan. 25 at 5:25 p.m.


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