Barbie and Hot Wheels pull Mattel to success despite Toys “R” Us liquidation impact

Mattel has revealed its fourth quarter financial results, in which Barbie and Hot Wheels were by far the company’s strongest brands with highest full year gross sales. This also helped to offset the declines in its other brands such as Fisher-Price, Thomas and American Girl.

The company reported a full year net sales of US$4.51 billion and fourth quarter net sales of US$1.52 billion. Out of which, Barbie’s gross sales in the quarter increased by 12% and 15% in constant currency, compared to the previous year. This was primarily driven by positive point-of-sale (POS) brand momentum, as said in the financial report. Meanwhile, Hot Wheels’ gross sales for the quarter increased by 9% and 12% in constant currency, compared to the year before. Recently, the car brand also celebrated its 50th anniversary, attributing to the increase in sales.

In an earnings call, Ynon Kreiz, chairman and CEO of Mattel said that the company’s short-to-mid-term goals include restoring profitability and regaining top-line growth in the business. He added that the company is looking to reshape its operations as well as expand its brand portfolio.

The company also reported an operating income of US$107 million in the fourth quarter, an improvement of US$358 million compared to the year before. This also marks as the largest year-over-year fourth quarter improvement since 2009 for the company. However, the toy company also decreased its advertising and promotion expenses by 4.6% in 2018, compared to 2017. In addition, Mattel faced a negative 6% impact from the Toys “R” Us liquidation and a negative 2% impact from the slowdown in its China business.

The company was said to be slashing 2,200 jobs, which makes up approximately 22% of its global non-manufacturing workforce in July last year. The move comes as the company sees impact from the exit of Toys “R” Us, which has impacted the US toy industry as a whole due to the loss in key customers. This saw gross sales being down 11% as reported and in constant currency, reflecting a 10% impact from the Toys “R” Us liquidation.

Kreiz explained in a statement that the company’s fourth quarter results demonstrate “meaningful progress” in executing its strategy and improvement over last year. While remaining focused on advancing its strategy to restore profitability and regain top-line growth in the short-to-mid-term, the company is also laying the groundwork to capture the full value of its intellectual property (IP) in the mid-to-long-term.

“After three consecutive quarters of solid, disciplined execution, we are well on our way to becoming an IP-driven, high-performing toy company and creating long-term value for our shareholders. Among all the achievements in 2018, I would like to applaud our team for regaining the #1 toy company position globally in a year full of challenges and headwinds. This is a great moment to celebrate, before we go back and continue the hard work of implementing our multi-year turnaround,” Kreiz said.

Joseph Euteneuer, CFO of Mattel added that key financial metrics, including gross margin, operating income, and earnings per share, are all moving in the right direction and the company's cost savings initiative is ahead of plan entering 2019. "Looking forward, we have ample opportunities to improve our financial performance across the board as our business strategy continues to gain traction in the marketplace,” he said.

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