Argus Downgrades Mattel As Top-Line Concerns Mount

Staszak stated in his downgrade report that he is concerned with Mattel's declining revenue and expanding losses. The analyst also highlighted the company's gross margins which fell by 680 basis points in the first quarter to 37.0 percent, which was notably lower than the 43.7 percent the consensus estimate was calling for.

Q1 Concerns

Staszak further noted that Mattel oversees four business segments and all four of them saw declining revenue on a year-over-year basis as follows:

1. Mattel girls and boys brands fell 16 percent to $441 million.
2. Fisher Price fell 8 percent to $247 million.
3. American Girl fell 12 percent to around $82 million.
4. Construction arts and crafts well 38 percent to around $39 million.

Given the sales decline in each segment, it shouldn't come as a surprise Mattel's management slashed its 2017 guidance which was issued on February 17. Specifically, the company is expecting full-year sales to rise by a mid-single-digit as opposed to a prior guidance of a mid- to high-single-digit.

Staszak's estimates is now calling for a 3 percent full-year sales growth from 2016 to $5.6 billion, down from a prior estimate of $5.7 billion.