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Mattel profits tumble
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February 2, 1999: 10:30 a.m. ET
Toymaker 4Q profits fall to $60M from $194M; restructuring may be ahead
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NEW YORK (CNNfn) - Mattel Inc., the nation's leading maker of children's toys, posted a dramatic drop in fourth quarter profits Tuesday, hurt by changes in the way toy retailers order merchandise for the yearend holiday season.
The El Segundo, Calif.-based company reported net income for the three months ended Dec. 31, of $59.5 million, or 20 cents a share, down from $195.1 million, or 64 cents a share in the year-ago quarter.
During the quarter, Mattel took a one-time, after-tax charge of $4 million or 1 cent per share to cover the costs of an expected legal settlement.
Excluding that charge, the company earned 21 cents a share for the quarter, in line with Wall Street's revised estimates.
Revenue, however, slipped to $1.5 billion, from $1.6 billion in the same quarter last year.
"As we disclosed in December, unexpected cutbacks by retailers and our further adjustment to a just-in-time shipping pattern negatively impacted our results," said Jill E. Barad, Mattel's chairman and chief executive officer.
"But there was good news coming out of last year," Barad added. "Retail sales of Mattel products at our top U.S accounts were up 12 percent, and yearend retail inventories were down 30 percent, positioning us well for 1999."
Barad noted that Mattel will reduce expenses in 1999, saying she is confident the company will meet its year-end earnings goal of $1.50 per share. Analysts see layoffs and restructuring in store for the company.
For the full-year, Mattel posted profits of $332.2 million, or $1.10 per share, up from $285.2 million, or 93 cents a share last year.
Mattel took the $4 million charge during the quarter to offset an expected settlement involving price coercion.
Mattel and other toy makers, as well as leading toy retailer Toys "R" Us, are in the process of settling with a group of state attorneys general. Toys "R" Us and the toy makers are accused of keeping some of the most popular toys from being sold in warehouse outlets.
Toys "R'"Us announced this fall it would close or sell 90 stores, cut about 3,000 jobs worldwide and take a $495 million third quarter charge to improve operations. Earlier in 1998, it announced a change in the way it orders holiday merchandise, delaying those orders until the second half of the year in an effort to stock the hottest toys.
Shares of Mattel (MAT) were down 5/16 to 24-3/4 in Tuesday morning trading.
-- from staff and wire reports
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Mattel
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