What happened
Shares of Mattel (MAT 3.16%) were moving lower today after the toy maker badly missed estimates in its fourth-quarter earnings report, showing its turnaround continues to drag on without the desired effect.
As of 11:55 a.m. ET, the stock was down 10%.
So what
Revenue in the quarter fell 22%, or 19% in constant currency, to $1.4 billion, well below estimates at $1.68 billion. Macroeconomic headwinds, difficult comparisons, and elevated inventory levels all led to the weak performance.
Sales were down sharply in October and November, and a December rebound wasn't enough to get the company out of the red for the quarter. Sales at the retail level actually increased, but elevated inventory levels coming into the quarter meant that Mattel's revenue declined.
Profitability also took a hit as gross margin fell 630 basis points to 43% due to higher markdowns, inventory obsolescence, inflation, fixed cost deleverage, and other factors. And adjusted earnings per share fell from $0.53 in the quarter a year ago to $0.18.
CEO Ynon Kreiz said, "Our fourth quarter results were below our expectations, as the macro-economic environment was more challenging than anticipated."
Now what
Mattel's guidance was also uninspiring as management called for flat sales growth in constant currency at nearly $5.44 billion, which compares with the analyst consensus of $5.91 billion. It also sees adjusted earnings per share falling from $1.25 to $1.10-$1.20, well below estimates at $1.66.
Management said it reduced debt and improved its leverage ratio, but even if the fundamental business is improving, the macro headwinds are poised to make 2023 a difficult year.
Given that, it's not surprising to see the consumer discretionary stock down double digits today.
