- Mattel filed an 8-K with the Securities and Exchange Commission Monday, stating it expects weak holiday sales due to slack inventory management and difficulty gauging retailers' inventory patterns.
- A new cost savings plan comes with a $200 million price tag, plus a hint that job cuts and major restructuring are on the way.
- This news comes less than two months after a disappointing Q3 2017 report revealing inventory management problems and heavy losses attributed to the Toys 'R' Us bankruptcy.
Mattel is one example of a manufacturer struggling to keep up with the evolving retailer and consumer markets. While many manufacturers are now selling directly to consumers, brands such as Mattel are still stuck on the retailer middleman. In 2017, that's hurting Mattel.
For example, in its Q2 2017 report, Mattel mentioned a class action lawsuit recently filed by previous company stakeholders, claiming Mattel misled investors about the state of retail customer inventory, further highlighting the company's floundering.
Now it appears the toymaker is confronting the inventory management issue head-on.
In the December 11 8-K, Mattel says its new cost savings plan will "incur approximately $200 million of costs, such as severance and restructuring costs, spent between the fourth quarter of 2017 and the end of 2019 in order to implement these initiatives."
The three cost-cutting areas Mattel plans to address are cost of sales (operations), administrative expenses and advertising. This plan dovetails with the second half of the 8-K, which highlights Mattel's inventory management problems.
"Underperforming brands" and "key retail partners moving toward tighter inventory management" are the big reasons why Mattel says "full year 2017 gross sales will decline by a percentage in at least the mid-to-high single digits compared to 2016."
That's a scary-sounding drop, especially at peak season, and it suggests some retailers are working hard to adjust inventory levels to meet consumer demand while manufacturers like Mattel have fallen dangerously far behind.
For retailers and Mattel's competitors, it's a warning: tight inventory control and fluidity is significant in an age when the supply chain is so accelerated. Consumers are aware of the latest trends faster than ever, and demand free (or very cheap) and fast shipping.
As tastes and trends evolve, manufacturers and retailers have to keep their inventory under control in order to stay profitable. Mattel isn't the first manufacturer to struggle, and it won't be the last — the toymaker's new cost savings plan could be its saving grace, especially after Toys 'R' Us.