Mattel shares plunge as not even American Girl is safe from sales decline – MarketWatch

For Mattel Inc., nearly everything that could have gone wrong in the third quarter did go wrong, including a stark decline in sales for one of the toy maker’s most iconic brands, American Girl, and other stars in the U.S. toys firmament.

Mattel’s American Girl Brands led sales declines for the company. Worldwide gross sales for the division, which offers American Girl-branded products directly to consumers, were down 30% year-on-year to $88 million.

That was mostly on lower licensing income and lower initial sales in the prior year through external distribution channels, Mattel

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In another American Girl-related hit, Mattel reported an increase in expenses for the quarter, reflecting costs associated with its new American Girl flagship store in New York City as well as higher employee-related costs.

Mattel shares tanked more than 20% late Thursday after the company reported a surprise loss for the quarter, blaming it on Toys “R” Us bankruptcy, tighter retailer inventories, and “challenges” with its underperforming brands.

Mattel said it lost $603 million, or $1.75 a share, in the quarter, versus a profit of $236 million, or 68 cents a share, in the year-ago period. Sales fell to $1.56 billion from $1.79 billion a year ago. Analysts polled by FactSet had expected earnings of 57 cents a share on sales of $1.8 billion.

Sales worldwide were down 13%, including a 22% decline in North American sales.

Sales for its Fisher-Price Brands division were down 15%, mostly thanks to declines in Thomas & Friends and infant products, Mattel said. Sales for its Construction and Arts & Crafts Brands division, which include Mega Bloks and RoseArt crayons, were down 29%.

The company also announced a cost-cutting plan seeking to save $650 million in the next two years, and suspended dividend starting in the fourth quarter in order to “increase financial flexibility, strengthen the balance sheet and facilitate strategic investments,” it said.

Mattel expects $50 million per quarter in additional liquidity with the suspension of dividend.

Analysts at Goldman Sachs earlier this month lowered their estimates for Mattel, calling into question the company’s attempt at turning itself around.

“We remain cautious on the sustainability of a Barbie recovery given heightened competition from Disney Princess, and have become incrementally more negative on Cars 3 following Disney’s guidance revision due in part to disappointing Cars 3 theatrical results,” they said in a note.

Mattel had warned in July that sales of merchandise tied to Cars 3 had been on the sluggish side.

Rival Hasbro Inc.

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 earlier this week warned of softer sales, also pinning it in part to the Toys “R” Us bankruptcy.

Shares of Mattel have lost more than 44% so far this year, contrasting with gains around 14% for the S&P 500 index.

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