Following fellow toymaker Hasbro Inc. (HAS, Financial) earlier this week, Barbie manufacturer Mattel Inc. (MAT, Financial) reported third-quarter earnings after the closing bell on Thursday.
The El Segundo, California-based company, which also owns the American Girl, Fisher-Price, Hot Wheels and Imaginext brands, among others, posted adjusted earnings of 18 cents per share, falling short of Thomson Reuters’ estimates of 20 cents. Revenue declined 8% from the prior-year quarter to $1.44 billion, missing expectations of $1.49 billion.
Despite the miss, the stock leapt 6% in after-hours trading as a result of a 41% increase in operating income to $121.9 million. Mattel Chairman and CEO Ynon Kreiz noted that this was the first time in eight quarters the company had posted year-over-year growth in operating income.
Like Hasbro, Mattel is feeling the effects of losing retailer Toys ‘R’ Us during the summer, posting a 3% loss. Regardless, the company managed to deliver 4% net sales growth in its North America segment, driven by strong Barbie sales, marking the highest sales growth for the region since the fourth quarter of 2015.
International net sales were not so rosy, decreasing 18% due to inventory issues and changing consumer trends in China and Europe.
By brand, Barbie was the top performer with 14% growth in global gross sales. After a multiyear slump, the iconic doll has seen a resurgence in popularity as a result of Mattel rolling out a new advertising campaign and giving their dolls a makeover, embracing different body types, skin tones and hair styles.
In contrast, sales of its other toys showed signs of weakness. Fisher-Price sales slid 12% while American Girl sales tumbled 31%. Its Toy Box segment, which encompasses Owned Brands and Partner Brands like Polly Pocket and Games, posted an overall decline of 9%.
Sales of Hot Wheels cars, another legacy brand, fell 6% after posting strong performance for the past several quarters. The company said the decline was due to the fact last year’s sales were boosted by Star Wars-themed Hot Wheels toys as well as the loss of exclusive items carried at Toys ‘R’ Us.
In a statement, Kreiz said that despite this discouraging performance among some of its Power Brands, market research company NPD Group found Mattel has “recaptured [its] position as the number one toy company globally in each of the last four months.”
“We are also the number one toy company in the U.S. and Latin America year-to-date through September,” he added.
The stock’s momentum did not carry over into Friday morning. With a market cap of $4.32 billion, Mattel shares were trading 3.03% lower at $13.44. Year to date, GuruFocus estimates the stock has spiraled 14% lower.
Disclosure: No positions.
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