Mattel Q4 results fall short of estimates as challenging macroenvironment weighs

February 8, 2023 4:56 PM EST
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(Updated - February 9, 2023 5:23 AM EST)

By Yasin Ebrahim and Senad Karaahmetovic -- Mattel (NASDAQ: MAT) reported Wednesday fourth-quarter results that missed analysts' forecasts as a weaker economic backdrop hurt sales during the holiday quarter in its core North America domestic market.

Mattel shares are down about 10% in pre-market following the report.

Mattel announced earnings per share of $0.18 on revenue of $1.4B. Analysts polled by anticipated EPS of $0.29 on revenue of $1.69B.

Gross billings in the North America business, which makes nearly half of revenue, fell 25%, as demand for toys including dolls and action figures waned. Billings in its International segment fell 19%, the company said.

As well as weaker revenue, the miss on the bottom line was driven by a slide in margins to 43.0%, from 49.3% in the prior year, as promotional activity to trim bloated inventory and higher input costs weighed.

Looking ahead to 2023, the company forecast adjusted EPS in a range of $1.10 to $1.20 and gross margin of about 47%.

The company touted share repurchases in 2023 amid efforts to strengthen its balance sheet during the year, and an outlook for increased free cash flow.

Truist analyst Michael Swartz cut the price target to $20 per share after "disappointing" results, guidance.

"While expectations were not demanding into the print, and MAT has some clear tailwinds in '23, we believe the existing inventory overhang and skepticism around MAT's ability to grow its core Barbie franchise in the year ahead will keep shares grounded for the next 2-3 quarters. We maintain our Hold rating on shares," Swartz wrote in a client note.

Wolfe analyst Greg Badishkanian added:

"Several other toy companies have issued negative 4Q reports, but we think Mattel’s bar was higher given recent stock outperformance."

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