Toy company Mattel, Inc. (NASDAQ:$MAT) has been struggling amidst the challenges faced by the retail industry recently. After releasing second-quarter earnings report on Thursday, July 27 — which fell below expectations — the company’s stock has decreased. As of July 28 at 11:46 A.M. PT, Mattel’s stock has fallen by about 8.4%.
Net sales for Mattel in its second quarter was $974.5 million, which was a bit below average analysts’ expectation of $979.7 million. Gross margin fell by 430 basis points thanks to higher royalty expenses and production costs, Mattel changing product offerings, as well as a decrease in licensing income. As a result, Mattel posted an adjusted loss per share of $0.14 this quarter. This was worse than analysts’ expectation of an adjusted loss per share of $0.09. It is also a significant change from the $0.02 loss per share that Mattel saw in 2016’s second quarter.
Despite the disappointing second quarter results, Mattel’s CEO Margo Georgiadis was quick to reassure investors that popular brands like Barbie, Hot Wheels, and Fisher-Price has shown strength in growth. As well, Georgiadis added that Mattel will be initiating its new business strategy — which includes faster growth in emerging markets, enhancing innovation, and integrating key brands into play systems and experiences — in the very near future.
It’s not just Mattel that’s struggled recently — fellow competitor Hasbro (NASDAQ:$HAS) also saw its shares fall earlier in the week ending July 28. While this could suggest an overall decline in the toy-making industry, Mattel has been significantly underperforming when compared to Hasbro. For the past year, Mattel has continuously missed its own estimation in profits.
Mattel’s guidance remained roughly the same, estimating a low-single-digit sales growth for 2017. Gross margin is expected to fall when compared year-to-year. Sequentially, however, gross margin should improve.
As such, Mattel’s stock looks like it may not be able to climb back up this year. Still, recovery is still possible in the long-term thanks to Mattel’s portfolio of popular toy brands
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