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3 Reasons For Needham's Stale Outlook On Mattel Prior To Earnings

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In a report published Wednesday, Needham Analyst Sean McGowan previewed multiple toy companies ahead of company earnings. Mentioned in his analysis was Mattel, Inc. (NASDAQ: MAT). McGowan seemed concerned about some of the companies brand struggles, expenses and management innovation.

When breaking down Mattel's problems, McGowan admits that, "Our expectation of a slight increase in 1Q revenue is probably too optimistic."

His first point moves to three of Mattel's biggest brands such as Fisher-Price, Barbie and American Girl, have seen varying levels of decline despite gross margins above the corporate average. This raises the pressure for the metric which, for years, management has put an strong emphasis on.

Related Link: A Mixed Bag For Toy Makers So Far In 2015

McGowan's next concern focuses on customers overseas. The strong dollar has been a notable crutch to sales in foreign markets. Currency issues could hinder Mattel's sales growth not only the first half, but potentially all of next year. Combine a strong dollar with searching for replacement revenue to offset the loss of Mattel's Disney Princess license and you understand why McGowan thinks Q1 revenue may be too optimistic.

Finally, board member-turned-CEO Chris Sinclair is the target of McGowan's last and most focused point. McGowan believes that investors will focus on 3 progressive points:

  • Sinclair's recent review on the company.
  • What the specific problems are regarding negative momentum.
  • The strategy moving forward to address theses issues.

After this process plays itself out, McGowan thinks management needs to prove to investors that they have fresh ideas, and business outlook has not become stale.

Latest Ratings for MAT

DateFirmActionFromTo
Oct 2020StifelMaintainsHold
Oct 2020MKM PartnersMaintainsNeutral
Oct 2020DA DavidsonUpgradesNeutralBuy

View More Analyst Ratings for MAT
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