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Mattel (MAT) Falls on Wider-than-Expected Q1 Loss, Sales Lag


Shares of Mattel Inc. MAT declined nearly 7% in afterhours trading on Apr 20, after the company reported weak results for the first quarter of 2017.

Earnings & Revenue Discussion

Mattel’s adjusted loss per share of 32 cents was much wider than the Zacks Consensus Estimate of a loss of 17 cents. Also, the loss was wider than the prior-year quarter loss of 14 cents, due to lower sales.

Furthermore, revenues of $735.6 million plunged 15% year over year as reported and in constant currency. The decline was due to the prolonged impact from the retail inventory overhang coming out of the holiday season and the resulting slower pace of reorders by retailers. In addition, continued softness in some of its girls properties along with lower licensing income hampered the results. Sales also failed to surpass the consensus mark of $810.2 million by 9.2%.

Quarter Highlights

Worldwide gross sales too plunged 15% year over year as reported an in constant currency.

Gross sales in North America (including the U.S., Canada and American Girl) were down a significant 24% as reported and in constant currency. Meanwhile, in the International region gross sales declined 2%. However, the same were flat year over year on a constant currency basis.

Notably, gross margin in the reported quarter decreased 680 bps to 37.9% from 44.7% recorded in the year-ago quarter. This was due to higher obsolescence expense, unfavorable impact of fixed cost absorption given lower sales, currency headwinds and lower licensing income.

Moreover, adjusted operating loss for the quarter was $122.1 million, much wider than the prior-year quarter loss of $38.6 million, due to lower revenues.

Worldwide Revenues by Brand

Mattel, through its subsidiaries, sells a broad variety of toy products, which are grouped into four major brand categories: Mattel Girls & Boys Brands, Fisher-Price Brands, American Girl Brands, and Construction and Arts & Crafts Brands.

As reported and in constant currency, worldwide gross sales at Mattel Girls & Boys Brands declined 16% to $444.1 million year over year. This reduction was on the back of a 34% plunge in the Other Girls brand, 21% decline in the Entertainment business and a 13% fall in Barbie sales (12% in constant currency). A 4% surge in the Wheels category was the only saving grace.

Gross sales at Fisher-Price Brands, which includes Fisher-Price Core, Fisher-Price Friends and Power Wheels, slipped 9% year over year to $246.9 million (8% in constant currency).

Gross sales at American Girl Brands were $82.2 million, down 12% from the year-ago quarter as reported and on a constant currency basis.

Gross sales at Construction and Arts & Crafts Brands, which includes the Mega Bloks and RoseArt brands, were $38.5 million, down a mammoth 38% from first-quarter 2016 as reported and in constant currency.

Mattel, Inc. Price, Consensus and EPS Surprise

Mattel, Inc. Price, Consensus and EPS Surprise | Mattel, Inc. Quote

Zacks Rank & Stocks to Consider

Currently, Mattel carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader Consumer Discretionary sector include Nintendo Co., Ltd. NTDOY, Boyd Gaming Corporation BYD and Penn National Gaming, Inc. PENN. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Nintendo’s fiscal 2017 earnings moved up 1.5% over the last 60 days. Meanwhile, for fiscal 2017, EPS is expected to improve a colossal 364.4%.

Boyd Gaming posted positive earnings surprises in three of the last four quarters, with an average beat of 14.27%. Further, for 2017, EPS is expected to grow a solid 23%.

The Zacks Consensus Estimate for Penn National Gaming’s 2017 earnings climbed 45%, over the past 60 days. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 67.45%.

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