Mattel, Inc. today reported third quarter 2019 financial results.
For the third quarter, Net Sales were up 3% as reported, and up 4% in constant currency, versus the prior year’s third quarter. Gross Sales were up 3% as reported, and up 4% in constant currency. Reported Operating Income was $150.1 million, an improvement of $28.2 million, and Adjusted Operating Income was $173.7 million, an improvement of $20.7 million. Reported Earnings Per Share was $0.20, an improvement of $0.18, and Adjusted Earnings Per Share was $0.26, an improvement of $0.08.
For the first nine months of the year, Net Sales were up 1% as reported, and up 4% in constant currency, versus the prior year’s first nine months. Gross Sales were up 1% as reported, and up 4% in constant currency. Reported Operating Loss was $28.3 million, an improvement of $311.6 million, and Adjusted Operating Income was $46.9 million, an improvement of $271.5 million. Reported Loss Per Share was $0.62, an improvement of $0.95, and Adjusted Loss Per Share was $0.41, an improvement of $0.77.
Ynon Kreiz, Chairman and CEO, Mattel said: “Our third quarter performance demonstrates the continued momentum of our multi-year turnaround and consistent progress in transforming Mattel into an IP-driven, high-performing toy company. We are executing very well on our strategy to restore profitability, delivering the fifth consecutive quarter where we achieved improvements in Reported Operating Income, EBITDA, gross margin and EPS. We are starting to see positive revenue trends with growth for the second quarter in a row as reported, and for the third straight quarter in constant currency. And we continue to make meaningful progress in laying the groundwork to capture the full value of our IP. We are encouraged by this momentum, as we remain focused on execution and the creation of long-term shareholder value.”
Joseph Euteneuer, CFO, Mattel said: “Our results demonstrate meaningful progress across all of our financial metrics. The improvement was driven by revenue growth and Structural Simplification savings. The company’s great performance in the third quarter and year-to-date, along with our ongoing consistent execution, will allow us to continue to drive value on a going forward basis.”
Financial Overview
For the third quarter, Net Sales in the North America segment were flat as reported and in constant currency, versus the prior year’s third quarter.
Gross Sales in the North America segment decreased 1% as reported, and in constant currency, primarily driven by a decline in Infant, Toddler and Preschool (including Fisher-Price Friends and Power Wheels®). This was partially offset by growth in Vehicles (including Hot Wheels partially offset by lower sales of Jurassic World® and CARS® vehicles), and Dolls (including Barbie).
Net Sales in the International segment increased 10% as reported, and 14% in constant currency, versus the prior year’s third quarter.
Gross Sales in the International segment increased 10% as reported and 13% in constant currency, driven by growth in Dolls (including Barbie, Polly Pocket® and the launch of BTS partially offset by owned brands), Vehicles (including Hot Wheels partially offset by lower sales of Jurassic World and CARS vehicles) and Action Figures, Building Sets and Games (including Toy Story 4). This growth was partially offset by a decline in Infant, Toddler and Preschool (including Fisher-Price Friends and Thomas & Friends).
Net Sales in the American Girl® segment decreased by 15% as reported, and in constant currency, versus the prior year’s third quarter. Gross Sales in the American Girl segment decreased by 14% as reported, and in constant currency, primarily driven by lower sales in retail stores.
Reported Gross Margin increased to 46.3%, versus 42.6% in the prior year’s third quarter, and Adjusted Gross Margin increased to 46.9%, versus 43.0%.
The increase in Reported and Adjusted Gross Margin was primarily driven by savings from our Structural Simplification program.
Reported Other Selling and Administrative Expenses increased by $40.1 million, or 12%, to $366.0 million, versus the prior year’s third quarter. Adjusted Other Selling and Administrative Expenses increased by $51.0 million, or 17%, to $351.4 million. The increase in Reported and Adjusted Other Selling and Administrative Expenses were driven by a higher incentive compensation accrual due to improved year-to-date business performance and Toys “R” Us bad debt recoveries in the third quarter 2018. These increases were partially offset by savings from our Structural Simplification program.
For the nine months ended September 30, 2019, Cash Flows Used for Operating Activities decreased by $218 million to $514 million, versus the prior year first nine months, primarily driven by a lower net loss, excluding the impact of non-cash charges. Cash Flows Used for Investing Activities decreased by $36 million to $78 million, versus prior year, primarily driven by lower capital spending. Cash Flows Provided by Financing Activities and Other increased by $240 million to $216 million, versus prior year, primarily driven by net repayments of long-term borrowings of $274 million in the first nine months of 2018, partially offset by lower net proceeds from short-term borrowings of $49 million.
Sales by Categories
For the third quarter, Worldwide Gross Sales for Dolls were $567.6 million, up 5% as reported, and up 7% in constant currency, versus the prior year’s third quarter, driven by growth in Barbie partially offset by a decline in American Girl.
Worldwide Gross Sales for Infant, Toddler and Preschool were $431.0 million, down 11% as reported, and down 10% in constant currency, versus the prior year’s third quarter, driven by declines in Fisher-Price Friends and Power Wheels.
Worldwide Gross Sales for Vehicles were $346.9 million, up 13% as reported, and up 15% in constant currency, versus the prior year’s third quarter, driven by growth in Hot Wheels partially offset by a decline in CARS and Jurassic World vehicles.
Worldwide Gross Sales for Action Figures, Building Sets and Games were $311.4 million, up 12% as reported, and up 13% in constant currency, versus the prior year’s third quarter, driven by Toy Story 4 and MEGA partially offset by Jurassic World.
- Third quarter Net Sales of $1,481.6 million, up 3% as reported, and up 4% in constant currency, versus prior year.
- Gross Sales of $1,656.9 million, up 3% as reported and up 4% in constant currency.
- Dolls category Gross Sales up 5% as reported, and up 7% in constant currency; Barbie®Gross Sales up 10% as reported, and up 12% in constant currency.
- Infant, Toddler and Preschool category Gross Sales down 11% as reported, and down 10% in constant currency; Fisher-Price® and Thomas & Friends® Gross Sales down 3% as reported, and down 2% in constant currency.
- Vehicles category Gross Sales up 13% as reported, and up 15% in constant currency; Hot Wheels® Gross Sales up 25% as reported, and up 27% in constant currency.
- Action Figures, Building Sets and Games categories combined Gross Sales up 12% as reported, and up 13% in constant currency.
- Structural Simplification run-rate savings of $826 million, exceeding target of $650 million exiting 2019; expect to exceed $854 million of run-rate savings by the end of 2019.
- Reported Gross Margin of 46.3%, an improvement of 370 basis points; Adjusted Gross Margin of 46.9%, an improvement of 390 basis points.
- Reported Operating Income of $150.1 million, an improvement of $28.2 million or 23%; Adjusted Operating Income of $173.7 million, an improvement of $20.7 million or 14%.
- Reported Earnings Per Share of $0.20, an improvement of $0.18; Adjusted Earnings Per Share of $0.26, an improvement of $0.08.
- For the nine months ended September 30, Cash Flows Used for Operating Activities improved $218 million.