Please ensure Javascript is enabled for purposes of website accessibility

Why Mattel, Inc. Stock Sank Today

By Jeremy Bowman - Feb 26, 2018 at 11:53AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the toy maker slipped today after a pair of downgrades.

What happened

Shares of Mattel, Inc. (MAT -1.12%) fell again Monday after the toy maker received several downgrades from analyst firms and credit reporting agencies. Among them were Fitch and Jefferies, which both lowered their view of the struggling toy company. As a result, Mattel shares were down 4% as of 11:53 a.m. EST, after trading down as much as 8.6% earlier in the day. 

A Hot Wheels track from Mattel

Image source: Mattel.

So what

Fitch downgraded the stock two steps further into junk territory to B+ as Mattel posted a wide loss in the key holiday quarter and is now coping with hundreds of Toys R Us stores closing. Fitch said, "Execution missteps, including the inability of the company to effectively respond to evolving play patterns and ongoing retail challenges, with retailers cutting back on inventory purchases, and most recently the September 2017 bankruptcy of Toys 'R' Us, Inc., have pressured operating results and cash flow." 

Jefferies, meanwhile, downgraded its rating on Mattel to underperform, arguing that the upside case for Mattel is already priced in and that the stock would fall if the anticipated turnaround doesn't materialize. 

Now what

Last week, Toys R Us, a key partner for Mattel, said it was closing 200 stores in addition to 182 it already announced it was closing in January. Mattel is struggling with a both a collapse in traditional retail channels and children's preference for electronics and screens over classic toys like Barbie. CEO Margo Georgiadis has promised to turn around the company by cutting costs and focusing on innovation and e-commerce, but given the secular headwinds in the industry, that won't be easy. With the company expected to report another loss this year, today's downgrades seem justified.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Mattel, Inc. Stock Quote
Mattel, Inc.
$22.08 (-1.12%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.