Stock for the American multinational toy manufacturing company Mattel Inc. (NASDAQ:MAT) was down 5.7% midway through the noon hour on September 18. Mattel competitors Lego A/S cut 1,400 jobs in response to a sales decline that some were blaming on the fall in box office numbers during the summer – down about 5% for the year. Mattel responded negatively to the news as it is a direct competitors with Lego with its Mega Blocks alternative.
A number of factors have converged to create this environment. The aforementioned box office performance has emerged due to a heavy mix of brands that have not yielded much success. Still, some big superhero movies are on tap in the fall and winter of 2017 along with the eighth Star Wars installment.
Mattel released its second quarter results on July 27. Worldwide net sales climbed 2% and 3% in constant currency. International sales saw an impressive 8% jump in net sales as North America saw much lower numbers. This has added to concerns that growth may have capped out to some extent in North American markets as toy companies turn to growth in emerging markets. Hollywood has also looked to build brands designed to appeal to these markets.
Mattel stock is now down 45% in 2017 and 52% year over year. Performance in emerging markets will continue to turn out but there is no guarantee that an improved box office in the fall and winter months will improve toy sales in North America. I would stay away from Mattel for the remainder of 2017.
