Mattel's bid to reverse the toy maker’s years-long slump faces a hurdle that doesn’t involve a toy: a product recall after infant deaths.
S&P Global Ratings said Mattel “likely has adequate insurance coverage for any potential litigation settlements” related to the sleeper but that the recall “puts added pressure on the company’s ability to grow revenues and cut costs enough” to support improved earnings.
Camilla Yanushevsky of CFRA Research said in a note that Mattel also had suffered “heightened reputational risk” from the recall. The company has been slumping for the last few years and unable to establish a strong path forward, with four chief executives in the last four years. Its current CEO, former studio executive Ynon Kreiz,The company is expected to post another loss for the first quarter, an adjusted 56 cents a share, according to analysts polled by FactSet.
Kreiz is trying to address that while also expanding the marketing of Mattel’s widely known toy brands to generate higher sales. At the same time, he’s streamlining the company under a plan to shed $650 million in operating costs. The goal is “to extend our toy franchises into new areas to drive top-line performance and greater profitability,” Kreiz said in athis month. He declined to be interviewed ahead of Mattel’s earnings announcement.
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