Toymaker Mattel Tanks the Most in Twenty Years Over 2019 Forecast

It was in early February that toymaker Mattel Inc. released its fourth quarter holiday financial report. The stock soared to its highest level in five months on the results.

Mattel’s fourth quarter results revealed the best sales yet for the company’s iconic Barbie doll in at least five years.

For the quarter, a surprise profit of 4 cents a share was reported. This is comparison to the staggering 16 cents loss a share that Wall Street analysts had been expecting. Revenues fell 5.4% to $1.52 billion however.

Sales of Barbie jumped 15% from the same period last year. Hot Wheels sales also jumped 12% to $286.8 million.

“In terms of brand highlights, 2018 was a great year for Barbie, which sustained growth and continued momentum globally. Barbie worldwide gross sales were up 15% both for the quarter and the full year in constant currency,” said CEO Ynon Kreiz on the investor call.

“Barbie was the number one global fashion doll property in 2018 according to NPD. We look forward to celebrating her 60th anniversary throughout 2019 with a number of exciting product launches and events.”

There was also 15% year-on-year decline in sales for Fisher-Price and Thomas & Friends, to $352.2 million. “Fisher Price was one of the Mattel brands most heavily impacted by the liquidation of Toys “R” Us as well as challenges we have faced in China,” said Kreiz. “As the effects of Toys “R” Us moderate and we work through channel inventory in China, the brand will be in a better position to restore growth.”

So after seeing such impressive moves after the holiday results, how is it the company’s shares tanked the most in nearly two decades just a week later?

It was a warning about 2019 that sent shares collapsing. The stock saw a drop of 18% on the news, the biggest drop in one day in almost twenty years for Mattel.

The company released 2019 guidance at the New York Toy Fair and said it expected flat gross sales in constant currency for the year. Mattel cited weakness in its Thomas & Friends and American Girl brands would weigh on performance.

Mattel has also warned that the demand for Barbie is slowing down.

For the first quarter, the company is expecting lower gross sales and expects adjusted earnings before interest tax, depreciation and amortization (EBITDA)of $350 million to $400 million for 2019. This came in below estimates of $480.18 million, according to IBES data from Refinitiv.

Gross profit margins for 2019 are forecast to be in the “low 40s” range, while analysts are expecting margins of 44.2 percent.

Last week Chairman and Chief Executive Ynon Kreiz said, “We remain focused on advancing our strategy to restore profitability and retain top-line growth in the short to mid-term.”