Mattel reported that net sales had a steep drop to $735.6 million compared to analysts’ expectations of $790.5 million. International sales dropped by 2% while sales in North America fell by 23% compared to a year ago. Mattel made a net loss of $113.2 million, from 73 million year on year.
This is Mattel’s biggest loss since 2002 and its steepest sales decline since 2009.
Mattel’s shares fell 6% to 23.70 after the announcement of its financial performance.
On earnings per share (EPS) basis, Mattel had a loss of 32 cents per share. Analysts polled by Thomson Reuters were expecting a loss of 17 cents per share.
Margo Georgiadis, Mattel’s chief executive, said, “Our Q1 results were below our expectations due to the retail inventory overhang coming out of the holiday period, but we remain encouraged by strong performance at retail for our key core brands, including Barbie, Hot Wheels and Fisher-Price as well as sustained momentum in high-growth markets like China.”
Sales of Barbie dropped by 13% in the first quarter, its 2nd consecutive quarter of falling sales for Barbie. Fisher-Price sales slumped by 9% in the first quarter.
Georgiadis said, “What we didn’t expect was the prolonged impact from the leftover retail inventory. It’s essentially isolated to North America and a few markets in Europe.”
One of the strategies Mattel has been trying in China is to create deals with online retail companies like Alibaba.
Mattel is also finding ways that will allow it to interact with consumers more and be actively involved with their consumers during the entire purchase process. Georgiadis said, “Consumers have a different path to purchase. They don’t shop less than they used to, it is just that the footsteps went online. You have to think differently in how you engage with users.”
Georgiadis was previously with Google and wants to use technology across all aspects of the Mattel business including innovation, marketing, and inventory management.
The only Mattel brand showing positive growth in the 4th quarter is the Hot Wheels, with sales up by 4%.
Mattel’s main rival, Hasbro, has boosted sales after winning the rights to sell toys based on Disney princesses like Elsa from Frozen. This happened after Mattel’s contract expired in 2016. In the 4th quarter of 2016, Hasbro had a 52% surge in sales for its girls division.
Last year, Barbie sales showed signs of recovery as it the brand innovated with three new body types: tall, curvy and petite to broaden Barbie’s market appeal.
One of the things Mattel is looking forward to the 2nd quarter is the release of Disney’s Cars 3. Mattel will produce toys from the movie. The upcoming movie, Wonder Woman, will also provide a sales boost for Mattel.
Hasbro, on the other hand, will boost sales as movies like Guardians of the Galaxy, Transformers, My Little Pony and Spider-Man gets released in theaters worldwide.
Since the start of 2017, Mattel’s shares have been down by 8.5%.