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Mattel Cites Leftover Inventory Issues in Q1 Report image

Mattel Cites Leftover Inventory Issues in Q1 Report

Mattel’s net loss for Q1 ended March 31 widened to $113.2 million from $73 million a year earlier, as sluggish holiday sales left it with increased inventory. Mattel’s Q1 global net sales fell 15% to $735.6 million, led by a 16% drop in revenue from girls and boys brands to $441 million.

Within the girls and boys segment, global entertainment-related revenue dropped 27% to $130.1 million. Mattel ended the quarter with $769.8 million in inventory, up from $698.3 million, but is “confident” it has “worked through” the majority of it, in preparing for a “strong launch” of Disney’s Cars 3 movie in May, CEO Margo Georgiadis said.

Much of the inventory was tied to the North American and European markets where it built up amid a “slower pace of reorders” from retailers, Georgiadis told analysts. Inventory of Mega Bloks construction products increased as sales of licensed products tied to the brand fell short of projections, Chief Financial Officer Kevin Farr said.

Mattel says Q2 sales of core brands thus far are up 3% from a year earlier.

There remain “isolated pockets” of inventory in North America, Farr said. During the quarter, Mattel wrote down $6 million in inventory, largely tied to the dropping of “ancillary” brands, said Farr, which he declined to identify.

The Fisher-Price brand posted a 9% decline in Q1 sales to $246.9 million, but is on track for a “sold performance” for the year, Farr said. Revenue from construction and arts and crafts, which include Mega Bloks, fell 38% to $38.5 million. Sales of Barbie products dipped 13% to $123.4 million. Revenue in North America plunged 23% to $448.3 million, while sales in international markets slipped 16% to $441.1 million.

Mattel expects to rebound in Q2 fueled largely by the release of Cars 3, which Mattel predicts will generate about $300 million in licensed toy-related revenue for Mattel, which is the master licensee. Mattel is fielding toys for the upcoming films Justice League (Nov 17), Fate of the Furious and Wonder Woman (June 2).  “All of these will target a different audience and consumer, which should give us an opportunity to get into multiple toy aisles,” Chief Operating Officer Richard Dickson said.

Contact:

Kevin Farr, Chief Financial Officer, 310-252-2000, kevin.farr@mattel.com

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