Mattel: A Mistake To Suspend The Dividend

Share Price Plunge Post-Earnings Miss The share price of Mattel (MAT) fell as much as 28% in aftermarket trading to $11.10 on disappointment over its wide earnings miss and the suspension of its dividend payment. Third-quarter 2017 EPS at $0.09 was $0.50 lower than the consensus estimate. Revenue also missed it by $260 million, declining 13.3% year on year to $1.56 billion. The shares recovered some grounds subsequently but still ended the after-hours market around 20% lower.
Investors had some warning signs, such as when the CEO of Hasbro (HAS) highlighted in its earnings call that the company had once again grown faster than the industry, just as it did in the previous quarter. The logic goes: if Hasbro is doing well, inevitably, it comes at the expense of others like Mattel and JAKKS Pacific (JAKK).
The likely collateral damage from the Chapter 11 filing by Toys “R” Us was also well known. Yet, analysts had apparently not discounted the impact sufficiently, with the company acknowledging that it had relied on sales realized through Toys “R” Us more so than its peers. Thus, the CEO, Ms. Georgiadis, described Mattel as being “hit disproportionately” by the bankruptcy of the dominant toy retailer.
Puzzling Dividend Suspension The suspension of the dividend was a surprising move, considering that the quarterly dividend has already been cut just a few months back to $0.15/share, a 60.5% reduction from the prior $0.38/share. This meant that... Read more

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