Mattel Sales Down in Q3 Amid Toys”R”Us Bankruptcy

Mattel’s worldwide net sales dropped 13 percent in the third quarter, with the company’s performance negatively affected by Toys”R”Us’s recent filing for bankruptcy.

Tighter retailer inventory management and challenges with certain underperforming brands also impacted Mattel’s Q3 results, which saw net sales in North America decrease by 22 percent and international net sales up only slightly by 1 percent. Reported operating income was $85.7 million, versus $317.4 million in the prior-year quarter. Adjusted operating income was $159.7 million, compared to $324.1 million. Barbie rose by double digits; Hot Wheels and Fisher-Price were up low-single digits; and Thomas & Friends was down double digits.

Mattel has unveiled a significantly expanded initiative to structurally simplify business and right-size cost structure in alignment with strategy. The company plans to eliminate at least $650 million in net costs over the next two years. It also suspended quarterly dividend starting in Q4 in order to increase financial flexibility, strengthen its balance sheet and facilitate strategic investments.

“Our Q3 performance was clearly disappointing, led by compression in North America driven by Toys’R’Us filing for bankruptcy, tighter retailer inventory management and challenges with certain underperforming brands,” said Margo Georgiadis, the CEO of Mattel. “Despite these challenges, we are making strong progress against our transformation plan, which we believe will deliver step change revenue growth and profitability. To accelerate progress toward these goals, with our new leadership team in place, we are taking bold steps to simplify our business and right-size our cost structure in alignment with our strategy. This will enable us to move faster to realize our most attractive opportunities as well as to unlock significant resources to invest in our transformation. We are optimistic about the future of Mattel and our ability to reposition the company to drive enhanced returns for shareholders.”