Mattel Q4 and Full Year 2016 to 2017 : Sales Fall After Loss of Disney Princess License
Mattel’s share price dropped by 17.65 per cent on the day it released results of its financial performance during its past fiscal year.
The company had been enjoying growth during the first three quarters, however, the forth quarter saw net sales worldwide fall by eight per cent. Leading to full-year fall of four per cent.
The toy maker’s sales have disappointed in the quarter that includes the Christmas shopping period. Profits in the forth quarter were 51 cents per share, well below even the lowest predictions of Wall Street analysts.
Christopher Sinclair, Chairman and CEO, said: “Our results were negatively impacted by a number of industry-wide challenges, including a significant U.S. toy category slowdown in the holiday period, and increased forex headwinds, and while our sales at retail remained strong, the slowdown triggered elevated retail promotional activity and decreased shipping, all of which had a significant impact on our gross margin.
“Even against this difficult backdrop, our core brands continued to show solid growth, and our performance in key emerging markets like China was equally strong. And, importantly, we offset a substantial revenue gap from the loss of the Disney Princess license. Looking forward, we remain broadly optimistic about Mattel’s performance in 2017 and beyond. Our core brands are strong and growing, we have a solid lineup of entertainment properties in the pipeline, and we are forging valuable relationships with key retail partners throughout the world.”
Mr. Sinclair will soon be replaced in the role of CEO by Margo Georgiadis, and will become executive Chairman. Ms. Georgiadis was previously president of American operations at Google and before that Chief Operating Officer of Groupon.
Over the year, sales of Fisher-Price brands rose by two per cent; construction, art and crafts products rose seven per cent; its Entertainment division (includes action figures) rose 13 per cent; Wheels (includes toy vehicles, such as, Hot Wheels) rose six per cent; American Girl sales were flat; Barbie increased by seven per cent, however, other ranges marketed to girls crashed by 52 per cent. Major factors in this decline included the loss of the rights to make Disney Princess Dolls and a decrease in the popularity of its previously successful Monster High series of fashion dolls.
Toy sales in the USA rose by 4.7 per cent during 2016 according to industry research company NPD Group, however, the firm did recognise a slow down during the first weeks of December, reflecting Mattel’s forth quarter trouble. Toys R Us saw a decrease of 2.5 per cent in its home markets of the United States, Puerto Rico and Guam during the all-important holiday season.
Exchange rates also had an effect on Mattel’s bottom line, the company cited that its gross full year worldwide sales were flat in constant current, opposed to a reported three per cent drop.
There is likely to be further challenges for Mattel and other toy companies that have significant sales in the United States – the world’s largest market for toys. The nation’s new president, Donald J. Trump, campaigned on a platform of job creation – especially in the manufacturing sector – and in his inauguration speech re-iterated his pledge stating he would: “…bring back our jobs”.
In practise this could mean imposing high, possibly punitive, tariffs or taxes on goods imported from outside the United States of America. Mattel, along with many mass-market toy makers, relies heavily on importing goods from China.
President Trump also suggested that the value of the dollar was “too strong”, Mattel has already seen its profits weaken due to currency fluctuations, any further weakening of the dollar would see an immediate impact on margins and could eventually see higher prices for customers.
Shares in rival toy maker Hasbro, who now produce Disney Princess dolls, fell by seven per cent on this day. It seems investors were rattled by Mattel’s worse than expected financials.