The Q3 2014 earnings report for large cap toy stock Mattel, Inc (NASDAQ: MAT), a potential peer of mid cap Hasbro, Inc (NASDAQ: HAS) and small cap JAKKS Pacific, Inc (NASDAQ: JAKK), is scheduled for before the market opens on Thursday (October 16th). Aside from the Mattel, Inc earnings report, it should be said that Hasbro, Inc will report Q3 2014 earnings on October 20th (Next Monday) before the market opens while JAKKS Pacific, Inc will report Q3 2014 earnings before the market opens on October 23rd (Thursday). Mattel, Inc, like other toy stocks, has struggled to remain relevant in an age when many kids prefer to play video, mobile and computer games rather than with physical toys.
What Should You Watch Out for With the Mattel, Inc Earnings Report?First, here is a quick recap of Mattel, Inc's recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page:
| EPS Est | 1.12 | 1.20 | 0.09 | 0.18 |
| EPS Actual | 1.21 | 1.07 | -0.03 | 0.03 |
| Difference | 0.09 | -0.13 | -0.12 | -0.15 |
| Surprise % | 8.00% | -10.80% | -133.30% | -83.30% |
| Current Estimate | 1.06 | 1.09 | 2.15 | 2.48 |
| 7 Days Ago | 1.06 | 1.09 | 2.17 | 2.50 |
| 30 Days Ago | 1.07 | 1.09 | 2.17 | 2.54 |
| 60 Days Ago | 1.07 | 1.10 | 2.16 | 2.57 |
| 90 Days Ago | 1.20 | 1.16 | 2.49 | 2.80 |
Back in mid July, Mattel, Inc reported that second quarter net sales fell 9% to $1.06 billion as gross sales decreased 8% in the North American Region (including a 1 percentage point unfavorable impact from changes in currency exchange rates) and decreased 9%, including a 2 percentage point unfavorable impact from changes in currency exchange rates, in the International Region. Gross sales for Mattel Girls & Boys Brands were down 13% to $689.0 million (worldwide gross sales for the Barbiebrand were down 15%), sales for Fisher-Price Brands were down 17% to $328.8 million, sales for American Girl Brands (which offers American Girl-branded products directly to consumers) were up 6% to $83.1 million and sales for Construction and Arts & Crafts Brands (which includes the MEGA BLOKS and RoseArt brands) were $61.6 million (Note: Mattel, Inc acquired MEGA Brands Inc on April 30, 2014). Net income came in at $28.3 million, or $0.08 per share, verses net income of $73.3 million, or $0.21 per share for the same period last year. The Chairman/CEO commented:
"In the second quarter, we made significant progress across a number of initiatives to better position Mattel in the second half of the year and beyond. For example, we completed the acquisition of MEGA Brands, reduced inventories, strengthened our management team, shifted marketing spend to the back half of the year, and exercised strong controls on SG&A expenses. And while results for the quarter did not meet our expectations, we did see improving POS trends. As we move into the second half of the year and the all-important holiday season, we need to drive POS higher by bringing innovative products to market, making additional advertising investments and optimizing the effectiveness of our marketing spend."
Despite the rosy comments, its worth remembering that Barbie's sales declined in a range of 13% to 15% in the past three quarters while the Wheels segment, which includes Hot Wheels and Matchbox, had four straight quarterly sales drops.
What do the Mattel, Inc Charts Say?The latest technical chart for large cap Mattel, Inc shows shares tanking for this year:
A look at a long term performance chart shows large cap Mattel, Inc drifting below the performance of mid cap Hasbro, Inc while small cap JAKKS Pacific, Inc has lost half its value over the past five years:
A technical chart for mid cap Hasbro, Inc shows shares bumping up to a ceiling while shares of small cap JAKKS Pacific, Inc have been volatile due to the activity of short sellers:
The third and fourth quarters typically hold the best indications for toys sales, as the third quarter reflects retail store sentiment and the fourth shows consumer habits during the winter toy rush. Hence, investors should pay attention to the coming earnings reports from toy stocks in general. However and as for Mattel, Inc, there may not be much management can do to stem the decline of Barbie along with Fisher-Price Brands – unless of course, kids decide to go back to playing more traditional games.
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