Global entertainment company Mattel has published its financial results for Q1 2020 and provided a business update on Covid-19 related matters.
Financial results for Q1 2020
Mattel has reported net revenues for the first quarter 2020 of $594m – down 14 per cent as reported, versus Q1 2019. Reported Operating Loss was $149.8m, compared to a prior year loss of $127.1m.
Speaking of the results, Mattel’s CFO Joseph Euteneuer, said: “Our accomplishments over the past two years position us well to respond to changing market conditions. In the first quarter, we delivered significant Gross Margin improvement with our highest first quarter Gross Margin since 2016, despite the Covid-19 disruption. Additionally, the cumulative savings from Structural Simplification, Capital Light, and our additional 2020 actions are expected to exceed $1bn exiting the year. With our cash on hand and access to our $1.6bn senior secured revolving credit facilities, we expect to have sufficient liquidity to effectively manage through the disruption and to continue to execute our strategy.”
Covid-19 Business Update
Protecting health and safety of its staff, while mitigating disruption to the business
Speaking of Mattel’s top priorities amid the Covid-19 pandemic, Ynon Kreiz, chairman and CEO, Mattel said: “Our top priority has been to protect the health and safety of our people and at the same time mitigate the disruption to our business. I am proud of how our team has embraced uncertainty and change and demonstrated resilience in the face of this challenge.”
In response to the outbreak, Mattel has taken preventative actions to protect the health and safety of the organisation and mitigate the disruption to the business. This includes the successful transition to a remote work structure for employees working in 35 countries, the implementation of stringent measures to safeguard personnel at plants and distribution centres, and the temporary closure of Mattel’s American Girl retail stores.
“Our work over the past two years to develop a flexible and results-oriented organisation is serving us well during this time. We remain focused on transforming Mattel into an IP-driven, high-performing toy company and creating long-term shareholder value,” said Kreiz.
As the situation begins to improve and we head towards the second half, Mattel expects to see increased demand for its brands. Kreiz said: “Looking beyond the second quarter, with supply chain and retail distribution continuing to improve and markets reopening, we are planning for increased demand for our products in expectation of a much-improved second half and holiday season. We are confident in our ability to navigate through the balance of the year and believe our assets, resources, and capabilities position us well to succeed in the recovery.”
Manufacturing and demand
The global supply chain organisation has rapidly responded to the frequent and unpredictable changes occurring in various locations where Mattel operates. The team has taken mitigating actions to return manufacturing and distribution operations to near-normal operating capacity, including China, and are taking similar actions in other parts of the world where necessary. Mattel believes operations are on the right path to meet production needs for the second half of the year, leading up to and including the holiday season.
Path to purchase and revised marketing strategy
The global commercial organisation has also been working with retail partners daily to navigate the dynamic landscape and evolving consumer path to purchase. The team developed and launched new promotions and marketing activation initiatives that were tailored to the new consumer behaviours. Additionally, joint business plans with retailers are being accelerated to compensate for the disruption and adapt to the retail environment, including transition to online retail and omni-channel experience.
Supporting the front-line, families at home and communities in need
Mattel is leveraging its expertise, products and resources to support communities, those in need, and frontline heroes. Design teams across campuses are partnering with Mattel’s manufacturing facilities to make personal protective equipment, including 500,000 face shields, for donation to medical professionals.
In addition, Mattel launched its “Thank You Heroes” collection, with all net proceeds being donated to First Responders First. Globally, Mattel has given grants to Feed the Children and Save the Children. Domestically, the Mattel Children’s Foundation has donated art supplies, games, and other toys to the Los Angeles Unified School District’s “LA Students Most in Need” charitable effort.
And the design and category management organisations have been quick to respond to consumer needs and find new ways to engage with Mattel’s brands. The company recently launched the Mattel Playroom, a free online platform that offers parents and caregivers a centralised resource for activities, expert advice, games, and content from our iconic brands.