Mattel Shares Drop as Toy Demand Dwindles

Shares of toy maker Mattel were dropping almost 12% in early-morning trading Wednesday after the company reported fiscal Q1 2020 financial results Tuesday night.

For the quarter, Mattel reported sales of $594.1 million. This was railing the $652.7 million that anaylsts had been waiting for. The company’s quarterly loss at $0.61 per diluted share was also worse than the $0.41 loss expected.

The company withdrew its previous guidance and has not provided new guidance for the rest of this year, citing “uncertainty related to COVID-19.”

“We believe the factors that have been driving the category shift are temporary,” said CEO Ynon Kreiz during the Tuesday earnings call. “And based on our most recent data, we expect that the industry will return to its pre-COVID-19 category trends.”

With the coronavirus prompting lockdowns, board games were faring better than Barbies and other toys.

“Retail door closures and other distribution challenges added to difficulty in getting products into the hands of consumers,” remarked Gerrick Johnson, analyst at BMO Capital Markets. “However, the company saw improving POS trends in April, and gross margin performance was better than expected.”

Kreiz has been optimistic about the second half of the year however for the company.

“While not recession-proof, the toy industry has been resilient in downturns… we believe parents will continue to prioritize spend on their children, even in tough economic times,” he said on a call with analysts.

“With approximately 65% to 70% of our sales usually coming in the second half of the year, there is time to regain sales momentum.”

Mattel announced that it will have a new line of “Baby Yoda” toys ready to hit shelves in time for Christmas.

Disclaimer: We have no position in Mattel Inc. (NASDAQ: MAT) and have not been compensated for this article.