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Mattel Stock Fell 37.8% in 2018, Sales Deteriorated

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Mattel stock fell

On a YTD (year-to-date) basis, Mattel (MAT) stock has fallen 37.8% to $9.56 as of December 21. Hasbro (HAS), Take-Two Interactive Software (TTWO), and Jakks Pacific (JAKK) stock have fallen 14.1%, 7.7%, and 11.1%, respectively.

Mattel is facing soft business trends in China, which had a negative impact on its sales growth. Persistent weaknesses in the American Girl, Fisher-Price, Thomas & Friends, and Toy Box brands added to Mattel’s troubles.

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At the macro level, toymakers in the United States have been hit hard as the sector grapples with the dissolution of Toys “R” Us. Toymakers’ troubles have been compounded by kids’ preferences for video games and digital-based toys. Online retailers aren’t making things easier. In the first three quarters of 2018, Mattel’s sales missed analysts’ estimates twice. Mattel’s sales improved year-over-year in one quarter.

North America sales bounced back

In the third quarter, Mattel’s North America sales rose 4%. The main factor was strength in the Barbie and Jurassic World product lines. The sales from the region have been subdued due to Toys “R” Us closing. In the first and second quarter, the sales fell 3.8% and 14.0%, respectively.

During the third-quarter conference call, Mattel’s CEO Ynon Kreiz stated that the Toys “R” Us liquidation could continue to impact the company’s sales in the fourth quarter. However, the effect will likely diminish by next year.

Barbie sales have been improving, which is a good sign. The emphasis on varied body types and skin colors drove Barbie sales along with strong marketing. Barbie sales have increased for three consecutive quarters. For the first three quarters, worldwide Barbie sales rose 15%. Hot Wheels have also been fairly strong with 6% increases in the first nine months of 2018.

Product innovation, an acceleration in marketing investments for brands, and a focus on the digital platform should help Mattel’s top line as the Toys “R” Us troubles dissipate.

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