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Bear of the Day: Mattel (MAT)

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Headquartered in El Segundo, CA, Mattel (MAT - Free Report) is one of the world’s largest manufacturer of toys. Their portfolio includes Barbie, Hot Wheels, Monster High, American Girl, Thomas & Friends and Fisher-Price brands. They employ approximately 32,000 people in 40 countries and sell products in more than 150 countries.

Weak Results Lead to Falling Estimates

Mattel’s adjusted loss of 14 cents per share was worse than the Zacks Consensus Estimate of a loss of 8 cents. Revenues also missed our estimate.

Estimates have also plunged after the report. Zacks Consensus Estimates for the current and the next year have fallen to $0.65 per share and $0.82 per share from $0.95 and $ 1.16 respectively before the results.

The company has missed in three out of last four quarters and just met in one, with an average negative quarterly surprise exceeding 47%.

Shares fell after the report and are now down over 46% year-to-date. In June, the company announced that it is slashing its quarterly dividend to $0.15 per share from $0.38 per share earlier.

Mattel, Inc. Price, Consensus and EPS Surprise

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

Executive Revamp

Earlier this week, the company announced the appointment of Joseph J. Euteneuer as the new CFO, replacing Kevin Farr. Prior to joining Mattel, Euteneuer was CFO at Sprint. The company had appointed a new CEO earlier this year.

Toys ‘R’ Us Bankruptcy

Toys ‘R’ Us—one of the biggest sellers of Mattel’s Barbie dolls--filed for bankruptcy last month. Per WSJ, Mattel and Hasbro are among Toys ‘R’ Us’s biggest unsecured creditors, with Mattel owed more than $135 million.

The Bottom Line

Mattel has seen weak sales for the past many quarters as they struggle with kids’ rising preference for videogames and smartphone applications. Additionally, they are losing in competition with Hasbro after Disney selected Hasbro for the Disney Princess and Frozen franchises. Mattel had previously held the license for those dolls.

Toys ‘R’ Us’s bankruptcy has created more headaches for this struggling company. In addition to a Zacks Rank #5 (Strong Sell), the stock has Style Score of “F” for Growth, Momentum as well as VGM. It is better to avoid the stock for the time being.

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