Barbie maker Mattel swings to loss as retailers cut orders, costs rise By Reuters

© Reuters. FILE PHOTO: Barbie dolls, a brand owned by Mattel, are seen at the FAO Schwarz toy store in Manhattan, New York City, U.S., November 24, 2021. REUTERS/Andrew Kelly

By Granth Vanaik

(Reuters) -Mattel Inc posted a bigger-than-expected loss for the first quarter on Wednesday as it grappled with higher costs and retailers cutting back on orders.

Consumer companies have been struggling with supply chain issues as well as higher labor and raw material costs, which led Mattel (NASDAQ:) to raise prices for toys and dolls over the past year.

Despite that gross margins fell 640 basis points to 40% in the quarter, also because excess stock forced retailers to cut orders for Mattel’s products as they try to keep their inventory levels tight.

That led to a 21% drop in net sales for Mattel to $815 million after adjusting for currency fluctuations. Analysts expected it to generate $740.7 million, according to Refinitiv data.

“Our first-quarter results were negatively impacted by elevated retail inventory and also due to the comparison to the year-ago quarter, which benefited from retailers building inventory earlier in the season,” said Chief Executive Ynon Kreiz.

“Retailers are working through this inventory and expect that to be corrected by the end of the first half.”

Big three retailers like Amazon (NASDAQ:), Target (NYSE:) and Walmart (NYSE:) have also to some extent cut back on some toy orders this year, said James Zahn, editor-in-chief of “The Toy Book”. “Smaller retailers did not have the inventory jam up that the big boxes have.”

Worldwide gross billings for Barbie, which represents amounts invoiced to customers, fell 41%, while Hot Wheels’ billings rose only 1%.

Excluding one-time items, Mattel lost 24 cents per share in the quarter ended March 31 compared to 8 cents adjusted profit a year ago, while analysts estimated a 19-cents loss.

The company, however, stuck to its full-year net sales and adjusted profit forecasts and said it expects inflation to moderate in 2023.