February 15, 2019 / 8:20 PM / 7 months ago

Mattel warns of weak 2019, shares drop most in 20 years

(Reuters) - Mattel Inc on Friday issued a disappointing 2019 forecast and said demand for its iconic Barbie doll was slowing, triggering an 18 percent drop in its shares, their worst day in nearly two decades.

FILE PHOTO: A worker carries Barbie dolls to put them on the shelves at a toy store in Caracas November 14, 2014. REUTERS/Carlos Garcia Rawlins/File Photo

The forecast comes barely a week after the company said strong holiday sales of Barbie drove a surprise fourth-quarter profit, which sent its shares up 23 percent the following morning.

On Friday, the El Segundo, California-based toymaker said gross sales for 2019 would be flat on a constant-currency basis, with weakness in Thomas & Friends and American Girl offsetting comparatively stronger sales of Barbie and Hot Wheels.

Even then, Barbie and Hot Wheels won't sell as much as they did in 2018, Chief Financial Offer Joe Euteneuer said in an investor presentatihere

Both Mattel and rival Hasbro Inc have continued to be haunted by the collapse of Toys “R” Us as they have failed to find newer avenues to sell their toys. They also face pressure as more children shun traditional toys to play games on tablets and mobile phones.

For the first quarter, Mattel said it expects lower gross sales, blaming the liquidation of the world’s biggest toy retailer and currency fluctuations.

It also expects adjusted earnings before interest tax, depreciation and amortization (EBITDA)of $350 million to $400 million for 2019, below estimates of $480.18 million, according to IBES data from Refinitiv.

Gross profit margins for 2019 are expected to come in the “low 40s” range, while analysts were expecting margins of 44.2 percent.

Mattel has been aiming to cut at least $650 million in net costs by the end of 2019 through job cuts and other means.

The company said it expects to keep reducing manufacturing costs, the benefit of which will be first seen in 2020.

The company’s shares closed at $13.82.

Reporting by Arjun Panchadar in Bengaluru; Editing by Anil D'Silva

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