Mattel makes turnaround progress as its results beat expectations

Mattel Inc. shares surged in late trading after first-quarter results beat Wall Street expectations, with more progress in Chief Executive Ynon Kreiz’s efforts to slash costs and boost the toymaker’s biggest brands.

Revenue slipped 2.7% in the quarter, but analysts had projected the drop to be three times as big. The company also reported a narrower loss per share as it continues to shake off the liquidation of major customer Toys R Us Inc.

Mattel’s Fisher-Price unit is dealing with a costly voluntary recall of its Rock ’n Play sleepers following more than 30 infant deaths. Mattel estimated that the recall of all 4.7 million sleepers had a $27.3-million impact in the quarter, including a $5.4 million reduction in net sales to account for product returns to retailers.

After about a year on the job, Kreiz is trying to make the case that he’s stabilized the toymaker and set it up for a return to growth after five years of revenue declines. The first quarter sets “a solid foundation for the rest of 2019,” he said in an interview.

The El Segundo company had already warned in February that sales would be essentially flat this year.

Kreiz, who spent his career in Hollywood before joining Mattel, envisions it as more of an entertainment company. He’s selling factories and other assets as part of an announced $650-million cost-cutting initiative that’s almost complete.

Mattel has created film and TV units, with live-action feature films in the pipeline for some key brands. They include Barbie and Hot Wheels with Warner Bros. Pictures Group (actress Margot Robbie is scheduled to star in a live-action Barbie film) and its American Girl dolls in a live-action movie with Metro-Goldwyn-Mayer Pictures.

The company is looking for more expenses to reduce, Kreiz said Thursday.

Mattel’s North American sales rose 5% — a noteworthy gain because that momentum came without the help of Toys R Us, which closed last year.

Barbie and Hot Wheels, Mattel’s biggest brands, kept growing in the quarter. But other major properties, including Fisher-Price and American Girl, continued to struggle.

Mattel shares rose more than 10% in after-hours trading. Before the earnings were posted, Mattel’s stock closed Thursday at $12.28, down 32% from the recent high.

Mattel posted a quarterly net loss of $183.7 million, or 53 cents a share, compared to a loss of $311.3 million, or 90 cents, in the same period last year.

Adjusted for non-recurring costs and restructuring costs, the loss came to 44 cents a share. Analysts polled by FactSet were expecting a loss of 56 cents a share.

Revenue for the quarter slipped to $689.2 million from $708.4 million in the year-earlier period.

Rival toymaker Hasbro Inc. this week reported an unexpected profit on the strength of cost cutting and revenue growth.

Improvement at Hasbro and Mattel may indicate that toymakers have put the worst behind them from the sudden death of retailer Toys R Us, analysts said. U.S. toy sales last year fell 2% to $21.6 billion with the Toys R Us liquidation, according to research firm NPD Group.