Shares of Mattel were hammered Thursday after the world's largest toy maker said sales of key toys like Barbie and Fisher-Price preschool items dropped in its fourth quarter.
Company stock has fallen 11% to $38.28 per share.
CEO Bryan Stockton called 2013 a "challenging and transformative year at retail."
Toy makers count on the November and December holiday season to make 40% or more of annual revenue. But traditional toy makers are struggling as kids turn more toward electronic devices and video games.
While fourth-quarter net income climbed 21% from year-ago results depressed by a litigation charge, the company's quarterly performance missed both analysts' estimates and the company's own expectations.
For the three months ended Dec. 31, Mattel Inc. earned $369.2 million, or $1.07 per share. That compares with $306.5 million, or 87 cents per share, a year ago. The prior-year period included an $87.1 million litigation charge.
Analysts surveyed by FactSet expected earnings of $1.19 per share.
Revenue dropped 7% to $2.11 billion from $2.26 billion. Analysts expected $2.37 billion.
Barbie and Fisher-Price sales both declined 13%. Sales for Hot Wheels fell 8%.
One bright spot was American Girl, which reported a 3% sales increase. Mattel said the performance was mostly helped by sales of the 2013 Girl of the Year, Saige.
CEO Stockton said weakness was mostly in the U.S. and the El Segundo, Calif.-based toy maker is continuing to invest in emerging markets like China and Russia.
Mattel's full-year net income increased to $903.9 million, or $2.58 per share, from $776.5 million, or $2.22 per share, in the previous year.
Annual revenue edged up 1% to $6.48 billion from $6.42 billion.
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