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Mattel's holiday quarter sales miss to hit current quarter

By Gayathree Ganesan

By Gayathree Ganesan

(Reuters) - Mattel Inc <MAT.O>, the largest U.S. toymaker, reported holiday-quarter sales and profit that fell far short of analysts' estimates, hurt by increased competition and weak demand in North America.

The company said the weak holiday performance would hurt current-quarter sales, and it shares slumped about 9 percent at $28.67 in after-market trading on Wednesday. Rival Hasbro Inc's <HAS.O> stock fell 4.1 percent to $83.20.

Mattel's net revenue fell 8.3 percent to $1.83 billion in the fourth quarter. Analysts on average had expected $1.96 billion, according to Thomson Reuters I/B/E/S.

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Sales in North America, the company's biggest market, fell 7 percent during the quarter, while sales overseas fell 2 percent.

Total sales in Mattel's girls and boys brands division, which includes Barbie, fell 7 percent in the fourth-quarter. They were down 3 percent in constant currency.

Sales of Barbie dolls also lost momentum, falling 2 percent after rising for three straight quarters. In constant currency, they rose 1 percent.

Gross margins declined 3.2 percentage points to 47 percent.

On a conference call with analysts, Mattel said its sales were hurt by heightened promotional activity due to a slump in consumer purchases during the first three weeks of December.

"Our results were negatively impacted by a number of industry–wide challenges, including a significant U.S. toy category slowdown in the holiday period," outgoing Chief Executive Christopher Sinclair said in a statement.

Mattel, which had been scheduled to release results on Feb. 1 but unexpectedly released them on Wednesday, said elevated inventory levels at the end of the fourth quarter would hurt current-quarter revenues. Overall, the impact would be less than 2 percent to total sales in 2017, the company said on the call.

Market research group NPD Group in a report released on Wednesday said the toy industry expanded 5 percent in 2016 as customers took advantage of early Cyber Monday online promotions during Thanksgiving week and spent more in the week before Christmas. Growth was led by toys based on the Star Wars franchise, whose license is owned by Hasbro.

But the sales growth missed NPD's own forecast of 6.5 percent that it issued in November.

Mattel's net income fell to $173.8 million, or 50 cents per share, in the latest quarter, from $215.2 million, or 63 cents per share, a year earlier.

Excluding certain items, the company earned 52 cents per share. Analysts on average were expecting 71 cents per share.

(Reporting by Gayathree Ganesan in Bengaluru; Editing by Sriraj Kalluvila and Leslie Adler)