Mattel Inc (NASDAQ: MAT) is a designer, manufacturer, and marketer of a variety of toy products through sales to its customers and directly to consumers. The products include fashion dolls, infant and preschool products, toy cars, and electrical vehicles most famously the Barbie brand, Fisher-Price, Hot Wheels and Matchbox.
Mattel that has suffered a 27% price decline from it all-time high of $47.80 a share on 30 December 2013 to a low of $35.90 on 18 July 2014; high inventory levels due to one of it’s weakest holiday quarters.
Here’s a visual representation of Mattel’s recent share price action:
Chart courtesy of Yahoo! Finance
In addition here are 13 metrics taken from ADVFN and Morningstar.com:
- PE Ratio (trailing): 14
- 5 Year average PE ratio: 14.4
- Enterprise value (EV)/EBITDA: 9.75
- Dividend yield: 4.1%
- Market cap: $12.3 billion
- Gross profit margin: 53% (lowest it’s been over 10 years is 47%)
- Operating margin 18%
- EPS: 2.58
- EPS 3 year average growth: 11.52%
- EPS 5 year average growth: 19.7%
- EPS 10 year average growth: 7.78%
- Current ratio: 3.23
- Debt to equity: 0.49
The world’s largest toymaker’s recent price decline can be traced to making public it’s third consecutive quarterly decline in revenue and sales for Barbie doll as children shift away from traditional toys towards electronic games and tablets.
Barbie sales have declined 8 times out of the last 10 quarters.
Also weighing in on share price demand is Mattel’s acquisition of Mega Brands Inc for $423 million in an attempt to enter the fast-growing building blocks market as well as a lack of innovation in new products all of which has helped to miss analysts’ expectations on revenue and earnings.
By contrast rival Hasbro Inc has seen strong demand in it’s ‘Transformers’ and ‘Spiderman’ toys figures help by the release of new films. Hasbro has also recently purchased a 70% stake in a mobile games maker.
In the full year report dated 31 January 2014 Bryan G. Stockton, Mattel Chairman and Chief Executive Officer said
…Mattel enters 2014 with the strongest global portfolio of brands, countries and customers in the toy industry. We must now effectively execute against our strategy to grow the business and deliver superior shareholder value.
This is an open admission that in order to deliver earnings growth and by extension share price growth Mattel needs to effectively market it’s portfolio of products to drive revenue if indeed they do have the strongest global portfolio of brands in the world.
Contrast that with 17 July Q2 financial results in which revenue was down 9% and that earnings per share was $0.08 (includes tax benefit of $0.11 per share and a negative impact of $0.06 per share of MEGA Brands acquisition and integration costs) vs. prior year earnings per share of $0.21.
Commenting Stockton stated
…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
This smacks of being slightly behind the curve in terms of product development and puts into doubt Mattel’s claims of having a strong global portfolio of brands.
I was initially going to add Mattel to The Value Investor Portfolio but forward guidance by management means that it has ended up of the watch list instead.