Toy company Mattel announced Wednesday that it will be cutting 2,200 positions, blaming the move primarily on the recent bankruptcy of Toys "R" Us.
What's the situation?
In reporting its second quarter financials, the maker of Barbie and Hot Wheels showed a 14 percent net sales decline. But CEO Ynon Kreiz said in the release that losses were not a surprise, given that Mattel's biggest customer closed last year.
"We are in a turnaround and as expected, had a challenging second quarter driven primarily by the Toys "R" Us liquidation," Kreiz said in a statement.
The layoffs will mean a 22 percent reduction of Mattel's nonmanufacturing workforce, and less than half of the positions being slashed will be in the U.S., according to the firm. In an effort to further cut costs, two of the company's factories in Mexico will be put up for sale.
Chief Financial Officer Joseph Euteneuer said that the company is "on track" with its two-year plan to deliver $650 million in savings.
While investors anticipated that Mattel would have a tough second quarter, the numbers were worse than expected. Analysts forecasted that the toymaker would report a loss of 30 cents per share, but Wednesday's release showed an adjusted loss per share of 56 cents.
Even if Toys "R" Us hadn't gone belly-up, Mattel would have shown a 1 percent loss in gross sales according to its second quarter financials.
So, what now?
The Wall Street Journal reported that the Toys "R" Us bankruptcy isn't Mattel's only problem. With heavy debt, high turnover in leadership, and lackluster sales in several products lines, the firm has struggled in several areas.
"There has been a big discrepancy between our financial performance over the last few years and where the company should be," Kreiz admitted in his statement.
But the CEO sought to give hope in his message.
"Our goal is to transform Mattel into an IP-driven, high performing toy company and I'm confident we have the right team, the right assets and the right strategy in place to achieve this and enhance long-term value for our shareholders," Kreiz said.
Both the WSJ and CNN reported that Mattel could be vulnerable to a takeover by rival toy giant Hasbro.