Mattel Inc. showcased its biggest names and partnerships at Toy Fair 2019 in New York City, hoping to capitalize on big names like Barbie and Hot Wheels, but is only forecasting flat gross sales for 2019, after factoring currency fluctuations.
Mattel’s MAT, +1.37% portfolio of superstar names in the toy space includes Barbie, which turns 60 this year, Hot Wheels, and Fisher-Price.
The company also has toys with pop-culture credentials based on franchises like World Wrestling Entertainment Inc. WWE, -0.98% , DC Comics characters like Batman, and Walt Disney Inc.’s DIS, +0.82% Toy Story, which has another film coming this year.
Recently, Mattel has unveiled a number of projects for the coming year, including dolls based on the blockbuster boy band BTS, a Barbie movie starring Oscar nominee Margot Robbie, a Hot Wheels movie, and 22 television shows.
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“In the mid-to-long term, we’re looking to capture the full value of our IP through franchise management and the development of our online retail and e-commerce capabilities,” said Chief Executive Ynon Kreiz during an analyst meeting on Friday, according to a FactSet transcript. Mattel executives gave their remarks as this year’s Toy Fair kicked off.
“With the creation of Mattel Films, Mattel Television and our global franchise management organization, we are targeting opportunities to develop our IP and extend our iconic franchises across film, television, digital gaming, live events, music and computer product and merchandise.”
Despite the upbeat talk, the company guided for gross sales this year that would be the same as 2018. The news sent shares spiraling downward on Friday afternoon, only a week after the stock surged on better-than-expected fourth-quarter earnings and revenue.
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“This year, we expect continued growth in Barbie and Hot Wheels though not at the same extent of 2018 levels and the stabilization of Fisher-Price by the end of the year,” said Joseph Euteneuer, chief financial officer at Mattel, during the analyst event. “This will be offset by a decelerated decline in Thomas [& Friends] and continued declines in American Girl as we execute our strategy, which includes the rationalization of our retail footprint to improve profitability.”
This year will also include the relaunch of the Polly Pocket toy, and the timing of entertainment releases compared with those in 2018, he said.
D.A. Davidson called the guidance “jaw-dropping.”
“We believe management is focused on beating expectations each quarter to build credibility, and our analysis indicates the Ebitda [earnings before interest, taxes, depreciation and amortization] guidance could be conservative,” analysts led by Linda Bolton Weiser wrote in a Tuesday note.
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D.A. Davidson rates Mattel shares neutral with a 12-to-18-month price target of $12.25, down from $14.
“We have long maintained that fixing top line growth versus cutting costs remains the more challenging aspect of the Mattel turnaround story,” wrote UBS analysts led by Arpine Kocharyan.
“While we agree that Mattel remains the owners of the most concentrated portfolio of evergreen toy brands, content monetization, especially through film could be challenging for Mattel in the near-term given balance sheet constraints.”
And while the interest in films is “encouraging,” UBS notes there are no specifics just yet.
UBS rates Mattel shares neutral with a $15 price target.
Mattel shares closed on Tuesday up 1.4% and have gained 40.2% over the last year. The S&P 500 index SPX, +0.15% is up 1.7% for the past 12 months.
