Mattel posted a $603 million net loss in Q3 ended Sept. 30, compared to a $236 million profit a year earlier, as sales dropped 13% to $1.56 billion. As other toy companies have, Mattel blamed part of the shortfall on Toys R Us’ bankruptcy.

Mattel recorded a $43 million net sales reversal tied to Toys R Us, representing the uncollectible portion of the chain’s outstanding receivables. Mattel was Toys R Us’ top unsecured creditor at $135.6 million (Inside Licensing Sept. 19). Mattel’s gross margin also declined 41.5% from 48.5%, due partly to the net sales reversal.

Mattel’s girls’ and boys’ brands posted a 9% decline in global sales to $967 million due partly to a 6% drop in Barbie sales, as well as declines in Monster High and DC Super Hero Girls.

The entertainment business reported a 1% increase in revenue driven by sales of Cars-related products, but offset by decreases in Minecraft and World Wrestling Entertainment items. Fisher-Price revenue fell 15% to $561.6 million on lower sales of Thomas & Friends products.

In North America, girls’ and boys’ brands recorded a 20% drop in revenue to $459 million due partly to Toys R Us, while Fisher-Price revenue was down 21% at $321.9 million. International net sales were up 1% at $675.2 million, led by the Latin American region, which posted a 4% gain to $216.7 million.

In light of the earnings, Mattel increased its cost-savings program to $650 million over two years from $150-$200 million outlined in June. Mattel will be “streamlining the number” of SKUs and  cutting jobs and reducing the “layers of leadership,” Chief Financial Officer Joseph Euteneuer told analysts.  “SKU proliferation added cost, including excess inventory and a disproportionate cost structure.”

Contact:

Mattel, Joseph Euteneuer, Chief Financial Officer, 310-252-2000