Mattel, the maker of Barbie, Fisher Price, and Monster High toys, saw global sales fall 13% in the third quarter from a year ago, a decline CEO Margo Georgiadis largely blamed on the bankruptcy of its largest retailer Toys “R” Us.
Mattel reported $1.56 billion in third-quarter net sales ended Sept. 30. Analysts had expected net sales of $1.81 billion. Mattel reported lower-than-expected sales in nearly every toy brand and category, particularly American Girl, which was down 30%, Monster High, DC Super Hero Girls, and Thomas & Friends.
Toys under the Cars brand, which is related to the Pixar Animation Studios movie, was one of the only areas to see an increase in sales.
Shares fell as much as 27% in after-hours trading.
The company posted a net loss of $603.3 million, or $1.75 per share, in the third quarter, compared with a profit of $236.3 million, or 68 cents per share, a year earlier. The loss was negatively impacted by a non-cash charge related to a valuation allowance on U.S. deferred tax assets of $561.9 million. Adjusted earnings per share was $0.09.
Mattel’s third-quarter performance was clearly disappointing, Georgiadis said in a statement, who added that the losses were driven by Toys “R” Us filing for bankruptcy, tighter retailer inventory management and challenges with certain underperforming brands.
“Despite these challenges, we are making strong progress against our transformation plan, which we believe will deliver step change revenue growth and profitability,” Georgiadis said. “To accelerate progress toward these goals, with our new leadership team in place, we are taking bold steps to simplify our business and right size our cost structure in alignment with our strategy.”
Among those bold steps was a decision to suspend its quarterly dividend beginning in the fourth quarter of 2017 and expand its plan to simplify the business. Mattel plans to eliminate at least $650 million in net costs over the next two years.
Over the past three years, Mattel has seen sales fall from $6.5 billion to $5.5 billion, gross margins tumble from 53.6% to 46.8%, while net income dropped from $904 million to $318 million.
Georgiadis, who is on Fortune’s 2017 Most Powerful Women list, No. 49, was hired as CEO earlier this year. She is faced with the dual problem of stemming a dip in sales in the short term and trying inject innovation into its products and operations that will boost the toy maker’s long-term outlook