Procrastinating Holiday Shoppers Cancel Christmas For Mattel

Jefferies’ Trevor Young believes that the 6.5 percent revenue miss, 320 bps gross margin decline and $0.19 EPS miss reported by Mattel, Inc. MAT for Q4 are likely to pressurize the stock.

The analyst maintains a Buy rating on the company, while lowering the price target from $36 to $32.

Delayed Shopping To Blame

“Growth remained positive for key properties such as Barbie, Wheels, and Fisher-Price despite tough comps, suggesting MAT's turnaround hasn't derailed,” Young mentioned.

The analyst pointed out that the Q4 miss was driven by a “dramatic” shift of customers delaying their holiday shopping to the last few weeks of the year, which led to increased retail promotional activity and decreased shipments, contributing to the revenue miss.

Headwinds

“Increased discounting, new promo, FX, and unfavorable input costs contributed to a -320bps GM decline, well below expectations of a +130bps improvement,” Young went on to say.

The gross margin miss was, however, more than mitigated by improvements in advertising spend and SG&A, leading to a $0.19 adjusted EPS miss.

“This pre-announcement will undoubtedly weigh on the stock in the short-term, as last week's CEO news was viewed by many as an "all clear" for holiday 2016,” the analyst added.

Young also noted that the preliminary guidance for 2017 suggests that while the turnaround has not derailed, long-term goals have been pushed into 2018.

At last check, shares of Mattel were down 14.27 percent at $27.06.