Shares of Mattel (NASDAQ:MAT) slumped on Thursday after the toymaker reported dismal second-quarter results and announced significant layoffs. The bankruptcy of Toys R Us has roiled the toy industry, adding to the list of problems facing the company. As of 12:55 p.m. EDT, Mattel stock was down about 6.8%.
Mattel reported second-quarter revenue of $840.7 million, down 13.7% year over year and about $11 million below the average analyst estimate. Gross sales dropped 11% adjusted for currency, with the Toys R Us liquidation knocking down sales by 10%.
Mattel's power brands put up a decent performance, all things considered, with gross sales down just 2%. Barbie gross sales jumped 12% year over year, while Hot Wheels gross sales surged 21%. This growth was offset by a 14% decline for Fisher-Price and Thomas & Friends. Outside of the power brands, Mattel's Toy Box brands suffered a 23% gross sales decline.
Non-GAAP earnings per share came in at a loss of $0.56, down from a loss of $0.14 in the prior-year period and a whopping $0.26 below analyst expectations. Lower revenue, a more than 10 percentage point plunge in gross margin, and higher operating costs as a percentage of revenue drove down the bottom line.
Given the weak performance, Mattel is taking action to lower its costs. The company announced that it will be eliminating 2,200 positions, or about 22% of its non-manufacturing workforce. Mattel also plans to sell manufacturing sites in Mexico.
"We see a lot of opportunities, but there has been a big discrepancy between our financial performance over the last few years and where the company should be," said CEO Ynon Kreiz. "Our goal is to transform Mattel into an IP-driven, high performing toy company and I'm confident we have the right team, the right assets and the right strategy in place to achieve this and enhance long-term value for our shareholders."
While there were some bright spots in Mattel's report, the numbers painted a bleak picture overall. Kreiz, who took the helm at the toy company a few months ago, will have his hands full turning Mattel around.