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Category: Stock Market and Mattel
Date: 8 October 2019 Stock Price: $11.20 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Mattel's a toy maker that owns iconic brands such as Hot Wheels and Barbie and card game Uno.
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About Mattel
Mattel is a leading global children’s entertainment company that specializes in design and production of quality toys and consumer products. We create innovative products and experiences that inspire, entertain and develop children through play. We engage consumers through our portfolio of iconic franchises, including Barbie®, Hot Wheels®, American Girl®, Fisher-Price®, Thomas & Friends® and MEGA®, as well as other popular brands that we own 8 or license in partnership with global entertainment companies. Our offerings include film and television content, gaming, music and live events. We operate in 40 locations and sell products in more than 150 countries in collaboration with the world’s leading retail and technology companies. Since its founding in 1945, Mattel is proud to be a trusted partner in exploring the wonder of childhood and empowering kids to reach their full potential.
Overview of Mattel's latest earnings report
The numbers we are interested in (for the quarter):
- Net sales: $860.1 million (up from $840.7 million for the same quarter of the previous year)
- Net sales increased by 2.3% over the last 12 months
- Cost of sales: $518.7 million (down from $587.5million for the same quarter of the previous year)
- Cost of sales decreased -11.7%by over the last 12 months
- Net loss: -$108 million (up from a loss of -$240 million for the same quarter of the previous year)
- Diluted loss per share: -$0.31 (up from a loss of -$0.70 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 345.9 million (up from 344.6 million for the same quarter of the previous year)
- Cash and cash equivalents: $194.1 million
- Cash and cash equivalents per share: $0.56
- Cash and cash equivalents makes up 5% of Mattel's market capital
- Cash and cash equivalents makes up 3.84% of Mattel's total assets
- Accounts receivable: $755.7million
- Accounts receivable makes up 14.97% of Mattel's total assets
- Inventories: $722.4 million
- Inventories makes up 14.3% of Mattel's total assets
- Stockholders equity in Mattel: $421.3 million
- Stockholders equity per share: $1.21
- So Mattel's is trading a 9.25 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
Mattel's management commentary on the results
EL SEGUNDO, Calif., July 25, 2019 – Mattel, Inc. (NASDAQ: MAT) today reported second quarter 2019 financial results.
Ynon Kreiz, Chairman and CEO, Mattel said: “This quarter further demonstrates the continued momentum of our multi-year turnaround strategy. We delivered topline growth in our North America and International segments across all regions, as well as growth in all categories 2 except one, exceeded our Structural Simplification target and still expect additional savings, achieved the fourth consecutive quarter of improved profitability and continued to make progress in laying the groundwork to capture the full value of our IP. We continue to gain traction and remain on-track to transform Mattel into an IP-driven, high-performing toy company.”
Joseph Euteneuer, CFO, Mattel said: “We continue to execute toward our goal to restore profitability and regain topline growth in the short-to-mid term, and to capture the full value of our IP in the mid-to-long term. The benefits of the team’s hard work are clearly materializing across the P&L. We remain focused on sustained progress, methodical execution and the creation of long-term shareholder value.
Sales by Categories
For the second quarter, Worldwide Gross Sales for Dolls were $273.4 million, up 3% as reported, and up 6% in constant currency, versus the prior year’s second quarter, primarily driven by growth in Barbie and Polly Pocket, partially offset by a decline in American Girl and Enchantimals. Worldwide Gross Sales for Infant, Toddler and Preschool were $252.0 million, down 13% as reported, and down 11% in constant currency, versus the prior year’s second quarter, primarily driven by declines in Fisher-Price Core, Fisher-Price Friends and Thomas & Friends. Worldwide Gross Sales for Vehicles were $214.1 million, flat as reported, and up 3% in constant currency, versus the prior year’s second quarter, primarily driven by a decline in Jurassic World vehicles and CARS, substantially offset by growth in Hot Wheels. Worldwide Gross Sales for Action Figures, Building Sets and Games were $222.7 million, up 21% as reported, and up 23% in constant currency, versus the prior year’s second quarter, primarily driven by the initial sales of Toy Story 4, partially offset by Jurassic World.
Ynon Kreiz, Chairman and CEO, Mattel said: “This quarter further demonstrates the continued momentum of our multi-year turnaround strategy. We delivered topline growth in our North America and International segments across all regions, as well as growth in all categories 2 except one, exceeded our Structural Simplification target and still expect additional savings, achieved the fourth consecutive quarter of improved profitability and continued to make progress in laying the groundwork to capture the full value of our IP. We continue to gain traction and remain on-track to transform Mattel into an IP-driven, high-performing toy company.”
Joseph Euteneuer, CFO, Mattel said: “We continue to execute toward our goal to restore profitability and regain topline growth in the short-to-mid term, and to capture the full value of our IP in the mid-to-long term. The benefits of the team’s hard work are clearly materializing across the P&L. We remain focused on sustained progress, methodical execution and the creation of long-term shareholder value.
Sales by Categories
For the second quarter, Worldwide Gross Sales for Dolls were $273.4 million, up 3% as reported, and up 6% in constant currency, versus the prior year’s second quarter, primarily driven by growth in Barbie and Polly Pocket, partially offset by a decline in American Girl and Enchantimals. Worldwide Gross Sales for Infant, Toddler and Preschool were $252.0 million, down 13% as reported, and down 11% in constant currency, versus the prior year’s second quarter, primarily driven by declines in Fisher-Price Core, Fisher-Price Friends and Thomas & Friends. Worldwide Gross Sales for Vehicles were $214.1 million, flat as reported, and up 3% in constant currency, versus the prior year’s second quarter, primarily driven by a decline in Jurassic World vehicles and CARS, substantially offset by growth in Hot Wheels. Worldwide Gross Sales for Action Figures, Building Sets and Games were $222.7 million, up 21% as reported, and up 23% in constant currency, versus the prior year’s second quarter, primarily driven by the initial sales of Toy Story 4, partially offset by Jurassic World.
Mattel (NASDAQ: MAT) stock price history
The image below, obtained from Google, shows the stock price history of Mattel over the last 5 years. And it's been a torrid time for Mattel stockholders. 5 years ago the stock was trading at around $30.70 a stock and its currently trading at $11.20 a stock. That's a very negative return of -63.50% lost by Mattel stockholders over the last 5 years. The stock of Mattel is trading at a lot closer to its 52 week low of $9.06 than it is 52 week high of $17.26 which to us is a clear indication that short term sentiment and momentum of Mattel's stock is very negative..
Recent coverage of Mattel
The extract below covers some of the latest news regarding Mattel as obtained from TheStreet.com
TORONTO, Sept. 25, 2019 /CNW/ - Mattel, Inc. (NASDAQ: MAT) today announced the global unveil of Creatable World, a customizable doll line offering endless combinations all in one box. Creatable World invites kids to create their own characters. Extensive wardrobe options, accessories and wigs allow kids to style the doll with short or long hair, or in a skirt, pants, or both. "Toys are a reflection of culture and as the world continues to celebrate the positive impact of inclusivity, we felt it was time to create a doll line free of labels," said Kim Culmone, Senior Vice President of Mattel Fashion Doll Design. "Through research, we heard that kids don't want their toys dictated by gender norms. This line allows all kids to express themselves freely which is why it resonates so strongly with them.
TORONTO, Sept. 25, 2019 /CNW/ - Mattel, Inc. (NASDAQ: MAT) today announced the global unveil of Creatable World, a customizable doll line offering endless combinations all in one box. Creatable World invites kids to create their own characters. Extensive wardrobe options, accessories and wigs allow kids to style the doll with short or long hair, or in a skirt, pants, or both. "Toys are a reflection of culture and as the world continues to celebrate the positive impact of inclusivity, we felt it was time to create a doll line free of labels," said Kim Culmone, Senior Vice President of Mattel Fashion Doll Design. "Through research, we heard that kids don't want their toys dictated by gender norms. This line allows all kids to express themselves freely which is why it resonates so strongly with them.
Mattel (NASDAQ: MAT) latest stock valuation
So what is Mattel's stock worth based on the release of their latest earnings report? Since the group is loss making and has been loss making for a while our base position for loss making firms is to value them at their stockholders equity per share. But in doing that we are saying the group that owns brands such as Hot wheels and Barbie is worth only $1.21 a stock. While the group continues to be loss making the losses ave narrowed and the group expects to make further cost savings in coming quarters which could see the group return to profitability. They are aiming at becoming an intellectual property (IP) toy company, probably looking to charge for the rights of using their toy brand names more than actual selling of toys. For example making a Barbie movie requires the owner of the IP, in this case Mattel to be paid for the right to use the name and brand.
Only time will tell if this strategy will pay off. But until it does we have no choice to value Mattel at $1.21 a stock and state that it is overvalued and we rate it as avoid.
Only time will tell if this strategy will pay off. But until it does we have no choice to value Mattel at $1.21 a stock and state that it is overvalued and we rate it as avoid.