April 26, 2018 / 8:27 PM / a year ago

Mattel's sales beat shows easing pain from Toy 'R' Us liquidation

(Reuters) - Toymaker Mattel Inc (MAT.O) showed signs of recovering from the aftermath of its top customer, Toy ‘R’ Us, going out of business as robust demand for Barbie and Hot Wheels toys lifted its first-quarter sales above Wall Street expectations.

FILE PHOTO: Comic Con fans gather at the Mattel booth they participate in the opening preview night at Comic Con International in San Diego,California, U.S., July 19, 2017. REUTERS/Mike Blake/File Photo

Mattel, whose shares rose nearly 4 percent to $14.49 in after-market trading, said it has adequate liquidity despite the impact of Toys ‘R’ Us.

On an adjusted basis, Mattel’s net sales, which excluded a $29.5 million reversal in sales due to Toys ‘R’ Us liquidation, rose marginally to $737.9 million in the quarter.

That exceeded the average analyst estimate of $694.38 million, according to Thomson Reuters I/B/E/S.

Analysts have lowered their sales estimates by nearly 3 percent since mid-March when the toy retailer decided to liquidate its stores.

“While the Toys ‘R’ Us liquidation created some challenges, setting this aside, Mattel is off to a good start with early momentum,” outgoing Chief Executive Officer Margaret Georgiadis said on a call with analysts.

Last week, Mattel named its board member and former Maker Studio executive Ynon Kreiz as CEO after Georgiadis stepped down from the top job after 14 months.

Shares of the toymaker, which houses popular brands such as Fisher-Price and Hot Wheels, have lost nearly half of its value over the last one year as sales have been under pressure.

The company has been trying to revitalize the line of dolls, including by changing to skin tones and adding plus-sized and hijab-wearing models.

The plan seems to have paid off as worldwide gross sales of Mattel’s iconic brand Barbie rose 24 percent in the quarter. Sales of Hot Wheels brand jumped 15 percent.

“Since last fall, we have evaluated several Toys ‘R’ Us scenarios and have a proactive mitigation plan in place,” Chief Financial Officer Joseph Euteneuer said.

However, Mattel’s turnaround would be slow as the company said it expects a drop in second-quarter revenue, largely due to the liquidation of the toy retailer.

“This is not going to be easy... But I feel confident about where we sit and what we have to do to take it on,” incoming CEO Kreiz said.

Mattel’s net loss widened to $311.3 million in the quarter ended March 31. Excluding items, such as sales reversal related to Toys ‘R’ Us and bad debts, it lost 60 cents per share, missing the average analyst estimate of a loss of 39 cents.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Arun Koyyur

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