Shares of Mattel, Inc. (NASDAQ: MAT) were taking a dive today after the toy maker posted a disappointing second-quarter earnings report.
Continue Reading Below
As of 11:26 a.m. EDT, the stock was down 8.4%.
The Barbie maker missed estimates on the top and bottom lines. Net sales were up 2%, or 3% in constant currency, to $974.5 million, below the analyst consensus at $979.7 million. Gross margin compressed by 430 basis points due to higher royalty expenses, change in product mix, lower licensing income, and higher product costs. As a result, the company's adjusted loss per share expanded from $0.02 a year ago to $0.14. That was worse than expectations of a loss of $0.09 a share.
CEO Margo Georgiadis said the company's key brands -- Barbie, Hot Wheels, and Fisher-Price -- showed strength, and that Mattel was moving quickly to activate its strategic plan announced last month. That approach includes accelerating growth in emerging markets, strengthening innovation, and building key brands into connected play systems and experiences.
Mattel's slide today follows a sell-off in Hasbro (NASDAQ: HAS) shares earlier this week, which could indicate overall weakness in the toy industry. However, Mattel has severely underperformed its chief rival over the past year, and has consistently missed its own guidance as profits have come in significantly below estimates for three quarters in a row.
The company reiterated guidance of low-single-digit sales growth for the full year, which it said would be more weighted toward the fourth quarter. Management also said gross margin would continue to fall on a year-over-year basis, but improve sequentially.
With that guidance, Mattel stock is unlikely to bounce back this year, but the company's stable of strong brands should aid its longer-term recovery.
10 stocks we like better than MattelWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Mattel wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of July 6, 2017