Mattel adjusted profit rises on cost cuts, North America Barbie sales dip

(Reuters) – Mattel Inc (O:) reported a rise in adjusted quarterly profit on Thursday as the company kept a tight leash on costs, even as holiday season sales of its flagship Barbie brand in North America were pressured by Hasbro Inc’s (O:) “Frozen” dolls.

The company exceeded its initial 2019 cost-cutting target of $650 million by 35% as Chief Executive Officer Ynon Kreiz looks to improve profitability through job cuts, closing manufacturing facilities and reducing the number of products manufactured.

Mattel expects $50 million in savings in 2020 from a “capital light program”, which includes the closure of four factories in Asia, Mexico and Canada, Kreiz told Reuters.

“We’re changing the way we operate,” said Kreiz, who took the helm in 2018.

Holiday quarter net sales fell 3.3% to $1.47 billion, slightly short of analysts’ estimates, as the November release of “Frozen 2” re-energized demand for rival Hasbro’s dolls based on the franchise’s main characters Elsa, Anna and Olaf.

Hasbro bagged the rights to make dolls based on the Disney Princess movies from Mattel in 2014, at a time when kids were increasingly turning to big Hollywood blockbusters and away from their traditional toys.

Mattel said gross sales in the North America fell 1% in the quarter, mainly due to a decline in Barbie and American Girl doll sales.

Major retailer Target Corp (N:) also said toy sales during the holiday period were flat, as launches of new original products and brands slowed.

On an adjusted basis, Mattel reported a profit of 11 cents per share in the fourth quarter ended Dec. 31, 8 cents higher than a year earlier.

Analysts had expected a profit of 1 cent per share and revenue of $1.50 billion.

Kreiz told Reuters the new coronavirus outbreak in China, one of Mattel’s biggest growth markets, would not have a material impact on sales in the first quarter.

However, he said it was still too early to tell how supply to other countries would be affected with the company’s Chinese manufacturing options currently closed.

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