NEW YORK (AP) -- Shares of Mattel Inc. slipped Tuesday after a Goldman Sachs analyst downgraded the toy company on the belief that sales slowed down during the crucial holiday quarter.
Michael Kelter, an analyst at Goldman Sachs, downgraded the stock to "Sell" from "Neutral." He believes that earnings for the fourth quarter will come up short of Wall Street expectations. The toy company, based in El Segundo, Calif., is due to report its fourth-quarter results Jan. 31.
"Our checks suggest that (Mattel) likely lost market share this Christmas, and that U.S. retail sales may be down in the 10 percent range, with broad-based weakness including in core dolls," Kelter wrote in a published note. He added that Mattel's largest brand — Barbie — is in decline, and many popular girls' products this year are in arts and crafts compared with dolls, Kelter wrote.
Kelter believes that a surplus of goods will hurt Mattel's first-quarter results.
Kelter says that he sees Mattel's revenue for the fourth quarter at $2.29 billion. Analysts expect $2.83 billion for the period, according to FactSet. He expects $1.14 per share in profit for the fourth quarter. Analysts expect $1.21 per share.
Kelter believes Mattel's earnings per share will stagnate in 2014, ending the year at $2.67, virtually flat with his 2013 earnings-per-share estimate of $2.64. Analysts expect $3.00 per share for 2014, according to FactSet.
The lowered expectations come as Mattel turned in a better-than-expected performance in the third quarter, ended Sept. 30. Strength of doll brands like Barbie and Monster High around the world helped Mattel's net income rise 16 percent in the third quarter.
Toy sales overall have been weak in North America, Europe and Australia, due to a weak video game market, an uncertain economy and continued popularity of electronic gadgets like smartphones and tablets. But Mattel, the largest U.S. toymaker with many popular brands, has fared better than its competitors.
Barbie, the No. 1 doll brand, reversed four straight quarters of sales decline to increase 3 percent during the third quarter.
Mattel's shares were down 63 cents to $45.99 in afternoon trading Tuesday.