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Mattel's (MAT) Underperforming Brands to Hurt Q4 Revenues

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Mattel, Inc. (MAT - Free Report) is scheduled to report fourth-quarter 2017 numbers on Feb 1, after market close.

Last quarter, the company’s earnings missed the Zacks Consensus Estimate by 83.93%. In fact, Mattel saw earnings misses in each of the trailing four quarters, the average negative surprise being 68.48%.

Further, shares of the company have lost 38.8% in the past year, against the industry’s gain of 49.6%.

We note that Mattel is particularly plagued by weak topline performance. The consensus estimate for fourth-quarter revenues is pegged at $1.76 billion, reflecting a 4.2% year-over-year decline. This is reflective of the downward trend, with revenues declining 9.7% year over year in the first nine months of 2017.

Now, let’s take a look at how this Zacks Rank #5 (Strong Sell) company’s top line will shape up around each of its brands in the to-be-reported quarter.


Top-Line Performance Weak

Mattel’s top line has been facing a number of challenges for quite some time. As it is, the industry has been tricky for toymakers due to declining demand for traditional toys. Owing to the growing demand for a broad array of alternative modes of entertainment, including video games, MP3 players, tablets, smartphones and other electronic devices from the likes of Electronic Arts (EA - Free Report) , the U.S. toy industry is facing declining sales.

Moreover, the recent Toys ‘R’ Us bankruptcy aggravated matters for major toy makers like Mattel, Hasbro (HAS - Free Report) and JAKKS Pacific (JAKK - Free Report) . Owing to the bankruptcy, Mattel witnessed a year-over-year decline in third-quarter 2017 revenues and profits. The effect of the bankruptcy is expected to affect the to-be-reported results as well.

Notably, per a recent regulatory filing, the company expects sales to decline in the fourth quarter as the company’s key retail partners are moving toward tighter inventory management.

 

Mattel, Inc. Revenue (TTM)

 

 

Major Brands Likely to Underperform

All of Mattel’s major brands have seen a decline in gross sales in the first nine months of 2017 from the year-ago level. The company expects 2017 sales to decline mid-to-high single digits compared to 2016.

The Mattel Girls & Boys Brands witnessed a 6% decline in gross revenues in the first nine months of 2017. The trend is expected to continue in the to-be-reported quarter. The fourth-quarter consensus estimate for gross sales of the brand is pegged at $1.04 billion, reflecting a 1% year-over year decline.

The Fisher-Price Brands recorded year-over-year gross revenue decline of 11% in the first nine months. The trend is expected to persist as the consensus estimate for the same in the to-be-reported quarter is pegged at $596 million, reflecting a 1.9% decrease from the year-ago quarter.

The fourth-quarter consensus estimate for the American Girl Brands’ gross sales is pegged at $259 million, showing an 8.8% year-over-year decline, which again is reflective of the downward trend. Gross sales of the brand declined 18% year over year in the first nine months of 2017.

Similarly, Construction and Arts & Crafts Brands saw a 30% year-over-year decline in gross sales in the first nine months of 2017. The consensus estimate for gross sales for the said brand is pegged at $103 million, reflecting a 17.5% decline from the year-earlier quarter.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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