Last year, Mattel lost $531 million on sales of $4.5 billion. Gross margins were 40%, so 40% of 4.5 billion equals $1.8 billion in profit. So add $1.8 billion to $531 million gets you around $2.3 billion. Divide that by 365 get you around 6.5 million, so are you telling me each day last year, as we were all going about our jobs, meeting and working on projects and eating lunch, Mattel was burning through six and a half million dollars?! -$6,500,000 a day? Am I missing something? Where the heck is that money going? How is that even possible? Is my math wrong or am I missing something?
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OP:
YOU need to laid off. Gross margin doesn’t equate to profit. If you had spent 10 minutes on the internet you could’ve looked it up! Sheesh!
Subtracted from gross profit are all the costs associated with running the business: cost of the product, advertising, salaries, travel expenses, buildings, maintenance and insurance. Mattel lost $500+million because of 2 things:
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their costs are higher than their NET margin
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Barbie used to deliver 65% margin but due to her need to run SOOOOOO much mote in advertising, she only generates about 40%. This is frightening.
That’s why Mattel ransoms the other brands to over- promote Barbie - they are trying (in a vain effort) to reinstate her prominence. But when the cash cow stops producing milk, it’s time to make hamburgers :)
OP: You don’t need help from anyone in finance to understand that Mattel is hemorrhaging day after day. It’s very simple math: Mattel spends more than it makes. Period. It is a downward spiral with no signs of reversal in sight. No amount of press releases about big movies or tech toys or PC Barbies will drag the stock out of the toilet. We are being flushed down and down and down. The question is not how are we losing so much money each day, but why no one is doing anything about it (other than taking more loans from Peter to pay Paul).
On top of paycheck, need to factor in bonus, options and management benefit.
It's the new "no fashion doll left behind" math. Oh sure, haterz, we may lose 6.5 million a day, but fear not: we'll make up for it in the volume. Hurry, limited time offer! Free FP Rock & Play sleeper with every purchase! Free Pete's coffee! Free Koolaid! Free Dianetics book! Just keep swimming!! We'll get there! Sunny days ahead! Challenge yourself! Free the winner in you! Operating Thetan - the game is coming!
Spending $6,500,000 a day might seem like a lot, but when you consider the size of Mattel, the number of employees and the massive overhead associated with a global company, it's not that much. I'd also assume it's not a steady burn rate, every two weeks they need to cut everyone a paycheck, or when some loan needs to be repaid, buy some new machines at a plant, etc. Still not a very sustainable business model.
Gross margin is the difference between revenue and cost of goods sold (cogs) divided by revenue.
Gross margin is expressed as a percentage.
Cogs includes the cost of the materials used in creating the good along with the direct labor costs used to make it.... It excludes indirect expenses, e.g., overhead, marketing, r&d, distribution costs, sales force costs, etc...
Are employee salaries baked into gross margins as some sort of R and D cost or is it just the manufactured good cost? I'm taking design and engineering.
Issac—you are outed. Stick to Linked in
No. I’m sorry. Finance can not help you. At all. Ever.