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Friday, September 25, 1998
"Money is better than poverty, if only for financial reasons." -- Woody Allen
Mattel Not Having Much Fun This Quarter
Santa's largest workshop, a.k.a. Mattel Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAT)") else Response.Write("(NYSE: MAT)") end if %>, isn't having much fun these days. The El Segundo, Calif.-based toy maker said after the close of trading yesterday that it expects earnings per share to come in around $0.75 for the third quarter and $1.80 to $1.85 for the year. This is two cents higher than a year ago for Q3 and up from $1.65 for all of 1997, but analysts had been projecting Q3 EPS of $0.80 and EPS for the year of $1.93, the average estimate of 11 analysts polled by First Call.
The source of Mattel's woes is playmate Toys "R" Us <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOY)") else Response.Write("(NYSE: TOY)") end if %>, its biggest customer, which last week announced it will take a $495 million charge in the third quarter to close 90 stores, combine many of its Toys "R" Us and Kids "R" Us stores, and cut up to 3,000 jobs. After meeting with Toys "R" Us management yesterday, Mattel said sales to the toy retailer could be down by as much as $200 million this year. Mattel CEO Jill Barad said Toys "R" Us is "doing what is right for its long-term business, which should benefit us in 1999 and beyond."
The world's largest toy maker was careful to stress that its business with other major U.S. retailers -- presumably meaning Wal-Mart Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %>, Kmart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KM)") else Response.Write("(NYSE: KM)") end if %>, and Dayton Hudson's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DH)") else Response.Write("(NYSE: DH)") end if %> Target Stores -- remain "very strong," with retail sales of Mattel toys up 16% through August this year. The company also said it will buy back as many as 15 million shares, up from the previously announced 6.5 million shares.
News to Go
Coca-Cola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> this morning warned that it expects flat third quarter earnings of $0.35 a share and lower fourth quarter earnings due to lower revenues in Asia, Latin America, and Eastern Europe. For the third quarter, the company estimated sales volume growth of 3% to 4%, short of analysts' expectations of 6% to 7% as well as last year's growth of 11%.
Shares in major Asian markets headed lower following the lead of Wall Street yesterday. The Nikkei yo-yoed down 481.94 points, or 3.4%, to 13723.83, while the Hang Seng Index dropped 133 points, or 1.7%, to 7701.61.
In an effort to qualify its merger with Daimler-Benz AG <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAI)") else Response.Write("(NYSE: DAI)") end if %> as a tax-free, pooling of interests transaction, Chrysler <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %> filed a registration statement with the SEC to issue 30 million shares of common stock. Accounting the merger as a pooling of interests would allow the combined company, DaimlerChrysler, to avoid taking future earnings charges to write off goodwill, the difference between the merger price and the value of Chrysler's assets.
Drugmaker Bristol-Myers Squibb <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BMY)") else Response.Write("(NYSE: BMY)") end if %> said early tests suggest that its experimental AIDS drug could be effective when taken once a day. The company could begin clinical testing of the drug on HIV patients next year.
Semiconductor maker Cirrus Logic <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CRUS)") else Response.Write("(Nasdaq: CRUS)") end if %> warned it will cut about 70% of its total fixed wafer fabrication capacity and related fixed costs to focus on more profitable businesses. The manufacturer of precision linear circuits and advanced mixed-signal system-level chip solutions plans to reduce its workforce by as much as 28%, roughly 400 to 500 employees, and will take a one-time charge of up to $500. For its fiscal second quarter, the Fremont, Calif.-based company anticipates breakeven results with revenues of $160 million to $170 million. That's slightly better than analysts' mean estimate of a loss of $0.02 a share, though lower than last year's profit of $0.13.
Standard & Poor's today lowered its ratings on Bankers Trust Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BT)") else Response.Write("(NYSE: BT)") end if %> and its units. The credit rating firm said, "The dearth of investment banking opportunities in that sector in the wake of market turbulence will reduce earnings potential over the medium term." In addition, Standard & Poor's said trading losses in emerging markets and high-yield markets will likely hurt earnings in the second half of the year.
barnesandnoble.com inc., a new subsidiary of Barnes & Noble Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BKS)") else Response.Write("(NYSE: BKS)") end if %>, announced it has filed a registration statement with the SEC for an initial public offering (IPO) of about 20% of its Class A common stock. The company plans to list on the Nasdaq National Market under the symbol "BOOK." Barnes & Noble plans to retain roughly 98% of the voting power in the new company.
Casual footwear maker Vans Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VANS)") else Response.Write("(Nasdaq: VANS)") end if %> reported fiscal first quarter earnings of $0.35 a share, up from $0.29 in the same prior-year period and higher than analysts' expectations of $0.33.
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
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