Mattel’s (MAT) turnaround is no kids’ game.
The toymaker behind Barbie and Fisher-Price said on Wednesday it would cut 2,200 jobs, or 22% of its non-manufacturing workforce, as it grapples with protecting its profit amid a deep sales slide in the wake of the Toys ‘R’ Us bankruptcy. The job eliminations are part of a $650 million cost-cutting program that also saw it close its New York City office recently.
The news sent Mattel shares down 7% in after-hours trading.
Mattel’s sales fell for a fourth straight quarter, continuing the toll losing its biggest customer has taken on Mattel, as well as rivals such as Hasbro. (HAS). Toys ‘R’ Us, which a year ago was a $6.5 billion-a-year U.S. retailer, recently closed the last of its stores after failing to find a white knight in bankruptcy court.
While retailers such as Amazon.com (AMZN), Walmart (WMT) and Target (TGT) have swooped in to pick up market share, losing a client as big as Toys ‘R’ Us will be painful for toymakers for some time. Earlier this week, Hasbro reported a smaller than expected sales drop, suggesting to Wall Street it is making progress in lining up new retailers to sell to.
Mattel’s second-quarter sales plummeted 14%to $841 million, below Wall Street projections. Two bright spots in its quarterly report were strong sales for Barbie and Hot Wheels, its two biggest brands. The company’s adjusted loss was 56 cents a share, far worse than the 31 cent loss analysts expected.
Ynon Kreiz, Mattel’s CEO, urged investors to be patient, saying in statement that “we are in a turnaround.” Kreiz, who replaced Margo Georgiadis in April after her short tenure, wants Mattel to focus less on manufacturing its own toys, and more on developing its own intellectual property. “Our goal is to transform Mattel into an IP-driven, high performing toy company,” he said. For now though, he’ll have to figure out his post Toys ‘R’ Us world.