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.
[See: 7 of the Best Stocks to Buy for 2018.]
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.
[See: 7 Companies Primed for an Amazon Buyout.]
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 the turnaround could be susceptible to set-backs and we hesitate to become more constructive until we see evidence in the financial results that the plan is gaining traction.”
D.A. Davidson has a “neutral” rating and $12 price target for MAT stock.
More from U.S. News
7 Robo Advisors With a Human Touch
7 Ways to Avoid Financial Stress Over the Holidays
Toys ‘R’ Us Closings Deal Another Blow To Mattel, Inc. (MAT) Stock originally appeared on usnews.com
