Coverage: Mattel shares drop after weak holiday sales

Mattel Inc. shares fell after the toymaker reported weak sales and profits from the holiday shopping season, a result of the company being forced to cut prices due to weak demand.

Mack Hogan of CNBC.com had the news:

Shares of Mattel plunged over 10 percent in extended trading Wednesday, after the company reported quarterly earnings and revenue that fell short of analyst expectations, and as its CEO prepares to step aside.

The toymaker reported earnings per share of 52 cents, well short of the 71 cents expected by Thompson Reuters. Revenue for the quarter was $1.83 billion, tumbling 8 percent after losing the Disney Princess line to rival toymaker Hasbro last year.

Mattel CEO Christopher Sinclair said in the report that a difficult holiday season had affected toy sales from all manufacturers and that Mattel still has a positive outlook for 2017. Sinclair will vacate his role next month, and is set to be replaced by Margaret Georgiadis, a former Google executive.

“‘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,’ said Sinclair.”

John Kell of Fortune reported that Mattel lost market share as well:

The full-year results also indicate that Mattel—which makes Barbie, Fisher Price and American Girl toys—lost market share in the critical U.S. market. Earlier Wednesday, research firm NPD Group estimated that the industry’s sales increased by 5% last year, boosted by Star Wars toys—a property that is closely associated with Mattel rival Hasbro. Mattel, however, reported a 7% drop in North America sales.

But Sinclair’s point about a highly promotional holiday season echoes what NPD had said in that firm’s industry report. In recent years, holiday traffic has consolidated to two periods of time: the Thanksgiving weekend and the week heading into Christmas. The first three weeks of December have seen soft foot traffic in brick and mortar stores, resulting in fewer impulse purchases.

Toymakers like Mattel and Hasbro, which are highly reliant on the success of retailers like Walmartand Target, may need to come up with new strategies to get their brands in front of consumers that don’t fully rely on retailers. Luxury brands, sports apparel makers and many others dependent on third-party physical retailers are also having to consider new strategies.

That’s a problem that may be top of mind for Mattel’s new CEO Margaret “Margo” Georgiadis. Georgiadis, formerly Google’s Americas president, takes over the role next month.

Sarah Mahoney of MediaPost notes that Mattel’s turnaround includes marketing Barbie to dads:

And it’s rolling out an entirely new marketing effort for its bouncing-back Barbie, targeting dads as key players in their daughters’ Barbie-fueled make-believe.

Citing Georgiadis’ skill and “deep understanding of how to build and scale brands on a global basis … effectively engaging consumers and retail partners in a rapidly evolving digital world,” the El Segundo, California-based toy company says she starts early next month and replaces Christopher A. Sinclair, who rises to executive chairman of the board. Recently, Mattel has been steadily adding tech to its offerings, including virtual reality and IoT dollhouses.

And its new ad campaign, from BBDO San Francisco, continues the ongoing “You Can Be Anything” theme. But these ads, which broke during National Football League games, showcase real dads playing Barbie with real daughters. Urging dads to turn halftime into playtime, the dads are treated by Barbie the doctor, rescued by Barbie the firefighter, assisted by Barbie the yoga teacher and instructed by Barbie the astronaut. (Ads are similar to Procter & Gamble’s Super Bowl effort last year, promoting its Pantene brand with NFL stars giving their daughters Dad-dos.)