) reported weak second-quarter 2014 results with earnings and
revenue missing the Zacks Consensus Estimate. Adjusted earnings of
3 cents per share missed the Zacks Consensus Estimate of 19 cents
per share by 84.2% and also declined 85.7% year over year. The
significant downside reflects weak sales and lower margins.
During the quarter, net sales declined 9.0% year over year to $1.06
billion, primarily reflecting poor performance in the domestic as
well as international markets. Sales of Barbie and Fisher-Price
dropped significantly during the quarter. Sales of the iconic doll
have fallen in eight out of the past ten quarters. Sales also
missed the Zacks Consensus Estimate of $1.17 billion by 8.8%.
Gross sales from North America (including the U.S., Canada and
American Girl) were down 8.0% year over year. In the International
Region, gross sales decreased 9.0%.
The company acquired Mega Brands Inc. on Apr 30, 2014. From this
quarter onwards, it has started reporting under four segments
Mattel Girls & Boys Brands, Fisher-Price Brands, American Girl
Brands and the newly added segment Construction and Arts &
Crafts Brands. Notably, Mega Brands Inc. was a leading global brand
in the construction building sets and arts & crafts category.
Worldwide gross sales at
Mattel Girls & Boys Brands
declined 13.0% year over year to $689.0 million. Worldwide gross
sales of the Barbie brand declined 15.0% due to weak demand. Gross
sales of the Other Girls Brands declined 11.0% due to a decline in
sales at Monster High, partially offset by higher sales at Disney
Princess and Ever After High. Gross sales of the Wheels category
declined 3.0% while the Entertainment business plunged 19.0% due to
lower sales of Radica and Games.
, which includes Fisher-Price Core, Fisher-Price Friends and Power
Wheels brands, declined 17.0% year over year to $328.8 million due
to weak demand.
Gross sales at
American Girl Brands
were up 6.0% year over year to $83.1 million.
Gross sales for
Construction and Arts & Crafts Brands
, which includes the Mega Bloks and RoseArt brands, were $61.6
Gross margin was down 490 basis points (bps) to 46.4% due to a
decline in total revenue. Decline in revenues could not offset the
decline in expenses. Therefore, operating profit declined
significantly year over year to $1.0 million. Operating margin
declined 800 bps year over year to 1.0%.
Mattel's top and bottom lines fell short of our expectations in the
reported quarter due to weak consumer spending. It seems that
consumer spending uncertainty still lingers amid sluggish economic
growth in the U.S. as customers curb their non-essential purchases.
However, we remain positive about the company's acquisition of the
Canadian toymaker Mega Brands. The acquisition would help Mattel to
expand in two of the fastest-growing toy categories - construction
building sets and arts & crafts categories.
The company presently has a Zacks Rank #2 (Buy). Investors
interested in the sector can also consider
), also with a Zacks Rank #2. Meanwhile, another gaming company
Electronic Arts Inc.
) will report its fiscal first-quarter 2015 results on Jul 22, 2014
Activision Blizzard, Inc.
) will report its earnings on Aug 5.
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