Toy retailer Toys ‘R’ Us is reportedly closing another 200 stores as the company struggles to emerge from its bankruptcy filing last September. Another wave of store closings is even more bad news for toymaker Mattel, Inc. (Nasdaq: MAT), which had previously been heavily reliant on Toys ‘R’ Us as a major retail partner.
After Toys ‘R’ Us initially closed 180 stores following its bankruptcy filing last year, the Wall Street Journal reports that another 200 store closings are coming in the near future. The 200 additional closings would leave only about 400 open locations, less than half of its 880 locations just one year ago.
Some experts have speculated that Toys ‘R’ Us will ultimately need to close half of its remaining locations and shrink to under 200 stores to remain viable in the long term.
The latest Toys ‘R’ Us news was yet another blow for Mattel, which traded lower by 0.9 percent on a booming day for stocks on Thursday. Mattel management has repeatedly blamed Toys ‘R’ Us for its lackluster performance in recent quarters. In the most recent quarter, Mattel reported a $281.3 million net loss and a 12 percent year-over-year drop in revenue.
Toys ‘R’ Us is Mattel’s second-largest customer behind only Walmart (WMT). Prior to the recent store closings, Toys ‘R’ Us accounted for 15 to 20 percent of Mattel’s U.S. sales and 11 percent of its total global sales.
Traditional toy retailers like Toys ‘R’ Us are facing unprecedented competition from Amazon.com (AMZN) and other online retailers. Mattel stock has been pounded in the past year, falling 34.6 percent. The company was even forced to suspend its 3.3 percent dividend starting in the fourth quarter in an attempt to cut costs.
In a recent investor meeting, Mattel management said they expect its cost-cutting strategy to keep sales roughly flattish in 2018. However, D.A. Davidson analyst Linda Weiser says there’s still not much to like about Mattel stock.
“Barbie and Hot Wheels are on solid ground and Thomas’ switch to airing on Nick Jr. should help, but Fisher-Price and American Girl still need strategies,” Weiser says. “We think…
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!