Mattel Rallies On Q4 Earnings & Sales Beat, Margin Rises

Mattel, Inc. (MAT - Free Report) has reported better-than-expected fourth-quarter 2018 results, wherein the bottom line surpassed the Zacks Consensus Estimate for two straight quarters. Also, the top line surpassed the consensus estimate after lagging in two consecutive quarters.

However, the big take away from the quarter under review was an increase in Barbie sales and higher operating margin. Following the quarterly results, shares of the company have increased 17.8% in after-hours trading on Feb 7. So far this year, the company’s shares have gained 23.7% against the industry’s 1.5% decline.

Adjusted earnings were 4 cents per share, outpacing the Zacks Consensus Estimate of loss of 11 cents. In the prior-year quarter, Mattel incurred an adjusted loss of 72 cents per share. A sharp increase in earnings was primarily driven by the company’s cost-saving initiatives.

Sales Discussion

Net sales of $1,524.3 million surpassed the consensus estimate of $1,418 million but declined 5.4% year over year. This underperformance can be attributed to Toys ‘R’ Us liquidation and slowdown in China operation. On a constant-currency basis, sales decreased 3% from the prior-year quarter. Notably, Toys ‘R’ Us liquidation and slowdown in China operation negatively impacted sales by 8% and 2%, respectively.

Worldwide gross sales were down 11% year over year as reported and 9% at constant currency. In North America (including the United States, Canada, and American Girl), the metric declined 10%, both as reported and in constant currency, due to a negative impact of Toys "R" Us liquidation. On a reported basis, net sales from the same region increased 6% year over year.

Meanwhile, in the International region, gross sales declined 7% as reported and 2% in constant currency due to a 4% impact of the slowdown in China business and a 3% impact of the Toys "R" Us liquidation.

Brand-Wise Worldwide Sales

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