Headquartered in El Segundo, CA, Mattel (MAT - Free Report) is one of the world’s largest manufacturer of toys. Their portfolio includes Barbie, Hot Wheels, Monster High, American Girl, Thomas & Friends and Fisher-Price brands. They employ approximately 32,000 people in 40 countries and sell products in more than 150 countries.

Weak Results Lead to Falling Estimates

The company reported weak results for Q4, missing on both the top and bottom lines. Adjusted loss of 72 cents per share was significantly short of the Zacks Consensus Estimate of earnings of 17 cents.

This was the fifth consecutive miss for the toymaker.

Toys ‘R’ Us Liquidation

Toys ‘R’ Us—one of the biggest sellers of Mattel’s Barbie dolls--filed for liquidation of its US operation earlier this month. It also plans to sell its businesses in some other countries. This is a major blow to toy makers like Mattel.

With its 700 stores, Toys “R” Us accounted for about one-fifth of toy sales in the US. According to WSJ, Toys “R” Us’ owed Mattel $136 million in September when it filed for bankruptcy.

Further, its demise will leave US Toymakers without a “national partner to showcase its wares year-round, test experimental products and find the next Shopkins or ZhuZhu Pet.”

Mass retailers like Walmart and Target choose to focus on top-selling toys, whereas Toys “R” Us takes risks with newer toys to discover the next big thing.

Mattel shares fell more than 7% after the report. According to analysts, the impact is expected to be larger on Mattel than Hasbro.

The Bottom Line

Mattel has seen weak sales for the past many quarters as they struggle with kids’ rising preference for video games and smartphone applications.

Additionally, they are losing in competition with Hasbro after Disney selected Hasbro for the Disney Princess and Frozen franchises. Mattel had previously held the license for those dolls.

Toys ‘R’ Us’ bankruptcy and planned liquidation has created more headaches for this struggling company. It is better to avoid the stock for the time being.