HASBRO, INC. (Reuters) - Shares of Mattel Inc (>> Mattel, Inc.) plunged nearly 17 percent on Thursday, their worst intraday percentage drop in eight years, after the Barbie maker reported dismal quarterly sales and profit, highlighting a tough holiday quarter for toymakers.
At least one brokerage downgraded its rating on Mattel's stock, while 5 other cut price targets.
"Mattel's issues this quarter were industry specific and we expect other toy companies to report similar industry challenges," Barclays analysts said.
The toymaker's results on Wednesday followed industry group NPD's report that the toy industry expanded a lower-than-expected 5 percent in 2016. NPD had earlier forecast toy sales to grow 6.5 percent.
"We don't believe that this demand shortfall dropped solely on Mattel's shoulders," Morningstar Equity Research analyst Jaime Katz said.
A "dramatic" shift of consumers delaying holiday purchases until the last few weeks of the year as well as online shopping, which provides more scope for comparing prices and restricts impulsive toy purchases in stores, hit holiday demand at brick-and-mortar stores.
The month of December, which historically makes up 35 percent of annual retail toy sales, saw sharp declines in brick-and-mortar sales, falling 7 percent in the first three weeks, Wells Fargo analysts said.
Even though sales picked up from the week of Christmas, it wasn't enough to off-set the volume declines in the quarter, several analysts said.
Toys "R" Us reported lower than expected sales, while toymaker Jakks Pacific Inc (>> JAKKS Pacific, Inc.) also announced dismal results for December. (http://bit.ly/2k6dPi6)
MKM Partners downgraded their rating on Mattel's stock to "neutral" from "buy".
Still, several analysts said Mattel's turnaround was on track, though the company's financial targets would be met later than expected.
"Preliminary 2017 guidance suggests the turnaround hasn't derailed, but long-term goals of about 50 percent gross margins and 15-20 percent adjusted operating margins are clearly pushed back into 2018 (or later)," Jefferies analyst Trevor Young wrote in a note.
B Riley analyst Linda Bolton Weiser said there still was underlying strength in most of Mattel's core brands and the company should see an uptick from its three major entertainment properties (Cars 3, Wonder Woman and Justice League) that will release in 2017.
Young, who maintained "buy" rating on Mattel's stock, cut its price target to $34 (27 pounds) from $37. Weiser cut her rating on the stock by $6 to $41.
(Reporting by Gayathree Ganesan in Bengaluru; Editing by Shounak Dasgupta)
By Gayathree Ganesan
