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Mattel cuts sales forecast after inventory overhang slams results

By Sruthi Ramakrishnan

(Reuters) - Mattel Inc (MAT.O) reported a far bigger-than-expected quarterly loss and drop in sales on Thursday, hurt by poor demand by retailers for key brands Barbie and Fisher-Price and due to big discounts to move inventory left after weak holiday sales.

The world's biggest toymaker also cut its full-year sales growth forecast after the dismal first-quarter report, where it posted its biggest loss since 2002 and steepest sales decline since 2009.

Mattel's shares fell 6 percent to $23.70 after the bell. Rival Hasbro Inc (HAS.O) fell nearly 2 percent.

Mattel had warned in January that weak holiday-quarter sales, due to higher promotional activity amid weak demand, led to excess inventory that would hurt revenue in the first quarter.

But the impact was much more than what Wall Street, and Mattel, had anticipated.

"What we didn't expect was the prolonged impact from the leftover retail inventory," Margo Georgiadis, who took over as chief executive in February, told Reuters.

Mattel's sales dropped 15.4 percent in the quarter ended March 31, to $735.6 million, well short of analysts' average estimate of $801.4 million, according to Thomson Reuters I/B/E/S. (http://bit.ly/2o8O6c8)

The company's net loss widened to $113.2 million from $73 million year-over-year. Excluding items, it lost 32 cents per share, much more than the 17 cents analysts had expected.

Georgiadis said the inventory issue was essentially isolated to North America and a few European markets, and that Mattel had cleared most of the excess inventory.

Still, the company cut its full-year sales growth forecast to a mid-single digit percentage range from a mid- to high-single digits range.


KEY BRANDS STUMBLE

Mattel said sales in its girls and boys brands division, which houses Barbie, dropped 16 percent in the first quarter. The division accounted for about 60 percent of total sales.

Barbie sales declined 13 percent, while Fisher-Price sales dropped 9 percent.

Georgiadis, who was previously Google's Americas president, said she would focus on developing more tech-enabled toys and connected products to launch in the next couple of years as well as push on with expanding in Asia.

Mattel has been boosting its presence in China's fragmented yet lucrative toy market through deals, including with Alibaba Group Holding Ltd (BABA.N).

Mattel's fortunes are in contrast with Hasbro, which has benefited since it won a lucrative contract to make dolls based on Disney princesses, including Frozen's Elsa, from Mattel in 2014. Hasbro is due to report on Monday.


(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D'Souza)