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(Reuters) -Mattel Inc projected 2023 earnings below expectations on Wednesday, as stubbornly high inflation is likely to impact consumer spending on its Fisher-Price toys and Barbie dolls.
The company’s shares were down about 12% in extended trading, having also missed fourth-quarter revenue and profit estimates.
While the toy industry has historically been more resilient to economic downturns compared with other discretionary sectors, Mattel (NASDAQ:MAT) said demand dropped off suddenly and sharply in October and November, leading to more profit-margin denting clearance sales to get rid of excess inventory.
“As we enter 2023 we expect it to be a challenging environment for consumers, not just in toys, but in general, so there could be volatility,” Mattel Chief Executive Officer Ynon Kreiz told Reuters, who also added the industry is likely to be flat or slightly up this year.
Rival Hasbro Inc (NASDAQ:HAS) also projected its holiday-quarter results below Wall Street expectations in January, and said it would cut 15% of its global workforce this year to return its business to a “competitive” position.
Kreiz said Mattel was taking “similar measures” to save an additional $50 million in costs this year, on top of its prior target of about $250 million.
Mattel projected adjusted profit between $1.10 and $1.20 per share for 2023, below analysts’ expectations of $1.66, according to Refinitiv data.
“In a year with Disney Princess, Monster High come-back, and a Barbie movie, it’s disappointing to see the outlook for flattish sales and an EBITDA decline in 2023,” said Linda Bolton Weiser, analyst at D.A. Davidson.
The company’s gross margin fell 630 basis points to 43% in the quarter ended Dec. 31. Excluding one-time items, Mattel earned 18 cents per share, below estimates of 29 cents.
Mattel said it expects to resume share repurchases in 2023, with about $200 million remaining under the company’s current program.
