NEW YORK (BLOOMBERG) - Mattel shares plummeted in late trading on Tursday (Feb 1) after a dismal holiday season squelched hopes that it can climb out of a years-long malaise.
The toymaker reported a 12 per cent revenue decline for the fourth quarter - when the company generates the largest portion of its annual income. Mattel also posted a surprise loss after expenses rose and it cleared out inventory, sending the shares down as much as 8.9 per cent in extended trading.
Since arriving from Google a year ago, chief executive officer Margo Georgiadis has revamped management, including a new finance chief, but has yet to revive Mattel's performance. Lead times in the toy industry are a year or longer, so any impact from new toys might not come until this year. One way she has altered the product lineup is killing brands and items to focus on its biggest properties.
"In 2017, we really had to clear the decks," Georgiadis said in an interview. "Now we have real quality brand momentum leading us into 2018."
The strategy is paying off with Barbie, Mattel's biggest brand, which posted a 9 per cent gain in sales last quarter. But results were uneven, with other girls properties plummeting 35 per cent.
Revenue declined to US$1.61 billion in the period, short of analysts' average estimate of US$1.69 billion. Mattel also posted a surprise loss of 72 cents a share excluding some items. Analysts had estimated profit of 16 cents.
The shares sank to as low as US$13.95 in late trading. The stock has fallen for seven straight days, losing 14 per cent of its value over the period. It has declined 40 per cent in the past 12 months.
The September bankruptcy of Toys 'R' Us, the world's biggest toy chain, has made Georgiadis's job even harder. The chain was Mattel's second-largest customer, after Walmart. Its woes were a big reason why Mattel's revenue in Norrth America sank 17 per cent last quarter.
Mattel's biggest rival, Hasbro, also was hurt by the bankruptcy of Toys 'R' Us. But it's weathered the challenges more effectively, helped by the revival of its Transformers and My Little Pony brands. In fact, Hasbro overtook Mattel in the past year as the No 1 toymaker in terms of sales.
There was speculation that Hasbro would ultimately acquire Mattel, but an offer hasn't materialized.
Mattel pulled back on Christmas-season shipments to its retail partners, even though it hampered revenue, in the hopes of reducing bloated inventories at chains. The company expects this will result in sales picking up and fewer promotions - in part because purchases of Mattel products at retailers rose for Barbie and Fisher-Price.
"There had been a prior strategy, which I inherited, and it clearly wasn't positioning us the way it needed to at retail," Georgiadis said. "We had pursued a more promotional strategy."