Retail

Even Barbie can't save Mattel from holiday sales slump

Key Points
  • Sales of Mattel brands failed to meet Wall Street expectations during the crucial holiday quarter.
  • Key brands, including Fisher-Price and American Girl, saw sales slump in the quarter.
  • Mattel was also hit by residual effects from the bankruptcy of Toys R Us.
And keeping the beat as Tenney’s drummer is newcomer Logan Everett, American Girl’s first-ever boy character.
Source: American Doll

Shares of Mattel fell 8.6 percent after the closing bell on Thursday as sales during the crucial holiday period failed to meet Wall Street expectations.

The toy company reported weak demand for key brands, including Fisher-Price and American Girl, as well as residual effects from the collapse of Toys R Us.

Mattel reported a net loss of $281.3 million or 82 cents per share, hurt by a one-time, $457 million charge related to new U.S. tax laws. In the year-earlier quarter, Mattel had a profit of $173.8 million or 50 cents per share.

"Our fourth-quarter performance reflects a tough quarter as part of what was a difficult and extraordinary year for Mattel," Margo Georgiadis, CEO of Mattel, said during an earnings call Thursday. "We faced multiple significant dislocations, driven by mixed brands performance and the [Toys R Us] bankruptcy. These contributed to significant top and bottom-line pressures."

The September bankruptcy of Toys R Us weighed heavily on Mattel. The world's biggest toy chain was Mattel's second-largest customer after Walmart and accounts for between 15 and 20 percent of U.S. sales.

Mattel has faced slowing sales in a number of its brands in the last few years as more children gravitate toward video games and electronics instead of traditional toys. The company's stock fell about 44 percent last year.

In the last quarter, sales of American Girl branded merchandise fell 23 percent, driven by lower demand. Georgiadis said a number of American Girl stores were not meeting company expectations and that Mattel plans to invest in revitalizing the brand's "premium" appeal and improve online and offline experiences.

Sales of construction toys and arts and crafts supplies, which includes Lego competitor Mega Bloks, fell 25 percent.

Sales of Fisher-Price toys slipped 12 percent, exacerbated by Toys R Us' bankruptcy and online retail issues. Georgiadis said shipping costs were an obstacle for reordering certain items late in the season.

Mattel's Wheels category, which includes Hot Wheels toys, saw sales fall 7 percent in the quarter. Georgiadis said the company hopes to leverage Hot Wheels' 50th anniversary to boost sales in this segment.

The company's "Other Girls" toys category, which includes Monster High and DC Super Hero Girls dolls, plummeted 35 percent. DC Super Hero dolls have previously been a major sales driver for Mattel.

While the majority of Mattel's brands saw sales shrink in the quarter, Barbie made a comeback with sales up 9 percent. The company has sought to revitalize the brand by offering products with a wider variety of skin tones and body sizes.

Entertainment toys also fared well for the company, with sales jumping 21 percent on the back of "Cars 3" merchandise. Mattel expects sales of "Cars" toys will continue to grow in 2018, especially in international markets.

Mattel declined to offer guidance for 2018. Georgiadis said the company would provide more insight as to its forecast at the New York Toy Fair in mid-February.