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January 31, 2014 4:24 pm
Fewer sales of Barbie dolls and Fisher-Price infant toys led to worse-than-expected quarterly earnings for Mattel, sending shares tumbling more than 12 per cent on Friday.
Although net income rose 20 per cent in the three months to December – which includes the crucial holiday season shopping period – this can be attributed to the prior-year results being hurt by a litigation charge.
Mattel and its peers have been under pressure to boost sales of traditional toys even as children are increasingly drawn towards electronic devices such as tablets and smartphones.
“By every account, 2013 was a challenging and transformative year at retail,” said chief executive Bryan Stockton. “We didn’t meet our growth expectations for the fourth quarter, or the full year, mainly driven by weakness in the US market.”
The California-based toymaker may have suffered as “big box” stores such as Toys ‘R’ Us and Target that sell its toys have been challenged as online retailers become the preferred choice for many shoppers.
The holiday shopping period, that includes Black Friday – the day after Thanksgiving – and Christmas, can account for up to 40 per cent of a retailer’s annual sales.
The company reported earnings of $369.2m, or $1.07 a share, up from $306.5m, or 87 cents a share, in the same quarter a year ago. That period included a $137.8m charge related to a long-running legal battle with Bratz doll maker MGA Entertainment.
December 2013: Big retailers on both sides of the Atlantic offered discounts in order to get shoppers through the door. Lex’s Vincent Boland and Oliver Ralph discuss what is driving the trend.
Net sales fell 6.3 per cent to $2.1bn, led by a 10 per cent drop in North America. The company said it saw strong sales growth in emerging markets such as China and Russia.
Barbie and Fisher-Price sales both declined 13 per cent, while Hot Wheels fell 8 per cent. American Girl dolls remained a bright spot, up 3 per cent.
Mattel’s quarterly performance missed analysts’ estimates of earnings of $1.19 per share on revenues of $2.37bn and the company’s own expectations.
The toymaker added that its advertising strategies were less effective in the 2013 holiday season leading to weaker-than-expected sales. “We did not maximise the effectiveness of our spending,” the company said on its earnings call. “The reality is, we just didn’t sell enough Barbie dolls.”
The company ended 2013 with more overall inventories than forecast, up 22 per cent to $569m.
Mattel shares fell to $37.50 in afternoon trading.
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