Mattel turned in mixed fourth-quarter results after holiday revenue was weighed down by continuing sales declines in its American Girl and Fisher-Price brands.
The company’s stock initially dropped, but now was up about 5% in extended trading, after posting the results.
Sales during the holiday quarter slumped 3%, once again feeling the strain from poor sales of American Girl dolls and Fisher-Price toys.
Sales in the American Girl segment dropped 20% in the fourth quarter, pulling down the entire doll category 6% despite the growth of the Barbie brand.
Declines in Fisher-Price Friends, Fisher-Price and Thomas & Friends brought the infant, toddler and preschool segment down 9%.
Mattel isn’t the only company that had trouble during the holidays. Funko, Target and Spin Master all reported disappointing holiday sales.
Meanwhile, Hasbro saw its sales rise 3% during the holiday quarter, buoyed by toys from Frozen and Star Wars that are tied to its Disney partnership. Hasbro won the rights to make dolls based on Disney’s princess movies in 2014.
Still, the weak sales in these segments seem to have been overshadowed by the company’s stronger-than-expected earnings and the fact that Mattel exceeded its initial 2019 cost-cutting target of $650 millon by 35%, or $225 million.
Mattel posted a slight profit in the fourth quarter, and broke even on a per-share basis, down from earnings of $9.6 million, or 3 cents a share, in the year-ago period.
Excluding one-time items, the company earned 11 cents a share. Analysts had forecast earnings of 1 cent per share, according to Refinitiv.
Revenue fell 3% to $1.47 billion, lower than the $1.50 billion estimate analysts had forecast.
“2019 was an important inflection point in our turnaround,” said Chairman and CEO Ynon Kreiz, in a press release. “We stabilized our topline after five consecutive years of revenue decline, continued to significantly improve profitability, and achieved positive operating cash flow and positive free cash flow for the first time in three years.”
The cost-cutting initiative brought on by Kreiz has been a push to turn the toy manufacturer into a more profitable and more nimble company by cutting jobs, closing factories and reducing the number of products created.
Mattel expects sales to grow between 1% and 2.5% in 2020, CFO Joseph Euteneuer said on an earnings conference call.
He said the sales increase would be driven by mid-single digit growth in its owned brands and would be offset by declines in its licensed brands.
He said the dolls category will continue to grow, boosted by Barbie sales, but hindered by continued sluggishness in the American Girl brand.
The company’s vehicles category is expected to get a boost from a license with “Top Gun: Maverick” as well as from Hot Wheels’ continued sales momentum.
The infant, toddler and preschool category will likely be down slightly, Euteneuer said. Additionally, Mattel expects action figures, building sets and games to see slightly lower sales as entertainment properties like “Toy Story 4” move further away from their theatrical release. “Minions” and “Minecraft” are expected to help sales.
The forecast excludes any potential impact from the coronavirus outbreak in China.
“As it relates to our supply chain, while none of our manufacturing is located in the Wuhan province, the ability of the manufacturing workforce to return to work after the lunar new year holiday, is being impacted by government guidelines,” Euteneur said.
Mattel’s factories and the third-party vendors it works with were originally scheduled to resume production on Feb. 3. However, manufacturers in the area are being advised wait until Feb. 17, he said.
“At this point in time, we do expect production delays in Q1, which may impact fourth-quarter results,” Euteneur said. “But remember that historically, Q1 is a seasonably small quarter for both production and revenue.”