What happened

Shares of Mattel (NASDAQ:MAT) plunged nearly 12% in early-morning trading Wednesday after its report of fiscal Q1 2020 financial results Tuesday night. By 12:10 p.m. EDT the shares had recovered about half their losses, but they remain down 5.6%.

Mattel's quarterly sales -- $594.1 million -- fell short of analysts' projected $652.7 million. The toy maker's quarterly loss was also worse than expected -- $0.61 per diluted share versus an expected $0.41 loss.  

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Image source: Getty Images.

So what

Sales declined 14% year over year at Mattel. The company's $0.61-per-share loss was about 20% worse than the loss Mattel suffered in last year's Q1.

That's the bad news. The good news is that the company's gross margin improved 820 basis points to 43% and that operating cash flow improved a bit as well -- $174 million versus $155 million a year ago.

Now here's the other bad news: Despite these improvements, Mattel's other selling and administrative expenses ballooned in the quarter, eating up all the company's gross profit and more, resulting in a greater operating loss and a much greater net loss on the bottom line.

Now what

Mattel has withdrawn its previous guidance and has not provided new guidance for the rest of this year, citing "uncertainty related to COVID-19." Some might call that a convenient excuse -- and for good reason. Mattel was in fact unprofitable for years before coronavirus arrived on the scene.

That said, data provided by S&P Global Market Intelligence show that Mattel had been making good progress shrinking the size of its losses over the past few years, shrinking its net loss from more than $1 billion in 2017 to just over $200 million in 2019, and seemed on a path to potentially earning its first profit in four years before the virus struck. Now that progress looks derailed.

Investors may need to wait another year to see a profit out of Mattel.

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