Last Updated on December 18, 2019 by Danielle
Shares decline as Mattel announces discouraging sales and big losses for Q1 2017.
After announcing a big loss and a 15% decline in sales for the first quarter of 2017, Mattel’s shares declined. The sales slump is reportedly due to unsold holiday inventory that are sitting on shelves.
Recall, in February 2017, Mattel’s new CEO, Margo Georgiadis, a former Google executive for the Americas division, came on board to turnaround the flailing toy company. Mattel has been fighting with changes in the toy industry and has been attempting to rejuvenate its core Barbie business and other brands in its portfolio. Last year, we even heard speculation about a potential merger between the two titans – Hasbro and Mattel – which eventually never panned out due to regulatory restrictions.
Barbie sales dropped 13% in this first quarter and incidentally it is the second consecutive quarter of declining sales for the Barbie brand after experiencing increasing sales in the first nine months of 2016. Barbie sales had been on the rise thanks to the introduction of new skin tones and body shapes, which served to counter arguments against Barbie’s unrealistic body proportions. According to Mattel, the new body shapes better reflect our society today and give girls more choices. Could the newest innovation Hello Barbie Hologram and the Barbie Fashionista line be enough to turn the tides?
Barbie sales were not the only ones negatively impacted. Fisher-Price sales also declined 9% in the first quarter.
Georgiadis told analysts that their financial results were below their internal expectations. Georgiadis also mentioned that these results were not acceptable given Mattel’s potential. Her explanation for the poor results was that holiday inventory is still lingering and retail sales are moving at a slow pace. The problem seems to be centered around the US and Europe.
For the first quarter of 2017, ending March 31st, Mattel announced a loss of just over $113 M. This amounts to a loss of about 32 cents per share, after adjusting for costs. Evidently, these results did not meet Wall Street’s lofty expectations. Analysts were forecasting losses around the neighborhood of 17 cents per share. So, clearly, Mattel missed the mark by almost two-fold.
In addition to these lackluster results, Mattel announced nearly $736 M in revenue. This also missed analysts’ expectations. Recall just last year, Mattel had revenues of $869 M. That’s a shortfall of almost $134 M in year-over-year (YOY) comparisons. Analysts had anticipated Mattel’s revenues to be around $810 M. So, again, this was a shortfall of nearly $75 M, compared to analysts’ expectations.
In the wake of this rather dismal news, Mattel’s stock fell to $23.61, falling greater than 6%. Since the start of the year, Mattel’s shares have dipped more than 8 percent; the S&P 500 in comparison rose around 5%. Despite the lackluster first quarter results, Georgiadis remained optimistic stating they are remaining positive thanks to the strong performance of its core brands – Barbie, Hot Wheels, and Fisher-Price at retail. Moreover, they have a good outlook for high-growth toy markets, such as in China. Also, Georgiadis has plans to produce more tech toys over the course of the next few years. She would also like to further expand their business and presence in Asia. Presently, they have been attempting to drive sales in China through strategic partnerships with Alibaba.
Contrastingly, rival Hasbro has been experiencing fantastic success after gaining the rights from Mattel to sell Disney Princesses and Disney Frozen dolls. In fact, just last month, Hasbro announced over a 50% increase in sales for the girls division.