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Mattel looks to Christmas for recovery as sales warning hits shares

(Reuters) - Mattel Inc MAT.O will have a new line of "Baby Yoda" toys ready to hit shelves in time for Christmas, the company said on Tuesday, even as it predicted a steep drop in second-quarter sales due to the coronavirus lockdowns.

FILE PHOTO: A Baby Yoda toy from Mattel is pictured in the Manhattan borough of New York City, New York, U.S., February 21, 2020. REUTERS/Carlo Allegri

The toymaker said its global manufacturing and distribution facilities, including in China where it produces 60% of its products, were largely back to operating at full capacity, echoing rival Hasbro Inc's HAS.O comments from last week.

Mattel Chief Executive Officer Ynon Kreiz, however, cautioned that while he was expecting demand to increase towards the vital end-of-year holiday shopping season, any ramp up in production would be dependent on evidence of consumer demand rising in the coming months.

The company forecast a bigger decline in second-quarter sales than the 14% drop it reported for the first three months of the year, sending its shares down 10% in extended trading on top of a 36% drop so far this year. Hasbro has also warned of a hit to sales in the in the current quarter.

Mattel, known for its Barbie and Hot Wheels toys, reported first-quarter net sales of $594.1 million, missing analysts’ estimates of $652.7 million, as toy stores were forced to close in strict government lockdowns to contain the spread of the virus.

Kreiz told Reuters that retail outlets, which normally account for about a third of Mattel’s sales volumes, were closed at the end of March.

The CEO, however, was more optimistic about the second half of the year.

“While not recession-proof, the toy industry has been resilient in downturns... we believe parents will continue to prioritize spend on their children, even in tough economic times,” he said on a call with analysts.

“With approximately 65% to 70% of our sales usually coming in the second half of the year, there is time to regain sales momentum.”

Mattel said it shipped about 750,000 plush toys based on the viral Baby Yoda character from the “The Mandalorian” Star Wars series on Disney+ in March and April and would be ready to meet holiday demand.

Excluding items, Mattel lost 10 cents per share in the first quarter, a penny more that what analysts had expected, according to IBES data from Refinitiv.

Mattel said it had $1.6 billion credit line and enough cash on hand to weather through the crisis.

Reporting by Uday Sampath in Bengaluru; Editing by Saumyadeb Chakrabarty

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