Mattel layoffs affect about 200 El Segundo workers in ‘mostly support and back office functions’

Among the 2,200 people laid off globally from Mattel this week,  roughly 200 people lost their jobs at the company’s El Segundo headquarters, according to a company spokesman.

Alex Clark, representing the toy company that created such iconic brands as Barbie and Hot Wheels, said much like the overall layoffs, those who were let go in El Segundo performed “mostly support and back office functions.”

The move was part of a $650 million cost-saving measure instituted last year. It comes as the company under-performed revenue expectations for the second quarter in a row.

Mattel, like other toy manufactures, has struggled to recover from the loss of Toys R Us, which has been liquidating stores after filing for bankruptcy protection last year. The company has blamed the store’s demise on a 10 percent drop in revenue.

“Part of the motivation (for the layoffs) was to free up resources to invest in other critical areas, such as design, brand development and sales,” Clark said.

Among the 2,000 employees in El Segundo, the layoffs represented about 10 percent of its workforce. More than half of the 2,200 overall layoffs came from overseas operations – representing about 22 percent of its non-manufacturing workforce, according to a statement.

In addition to the layoffs, the company announced plans to shutter its manufacturing plants in Mexico. Clark said the move was tied to achieving greater efficiencies at its 12 factories currently in Asia.

“The economics just didn’t make it worth it for us to keep operating those factories in Mexico,” Clark said. “One of the main reasons we were in Mexico is because there is a shipping cost advantage. But over the years through economies of scale and efficiencies we have been able to manage quite well the cost of freight.”

Clark said with unemployment rates in Mexico relatively low, the company expects those workers to have little trouble finding employment.

CEO Ynon Kreiz said the company planned to increase its pursuits in the field of intellectual property. A perception exists among analysts the company has fallen behind competitor brands that have launched apps, movies and television shows.

“We see a lot of opportunities, but there has been a big discrepancy between our financial performance over the last few years and where the company should be,” Kreiz said. “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 took over earlier this year when Mattel’s chief executive Margaret Georgiadis left the company in April after just 14 months, taking home compensation in 2017 valued at $31.3 million. During her brief stint as CEO, Georgiadis also tried to position the company more toward technology.

Shares of Mattel stock dropped more than 9 percent in after-hours trading on Wednesday following new of the layoffs, then the stock price bounced back about 6 percent on Thursday.

While Mattel’s second quarter sales fell 14 percent to $841 million in the second quarter, there were some bright spots, according to Clark. Both Barbie and Hot Wheels continued to grow by double digits. The doll line increased sales by 12 percent while Hot Wheels recorded gains of 21 percent, the company reported.

“Those brands are on fire,” Clark said. “People are buying Barbies and Hot Wheels like they never have before.”

Sales are also promising for the new line of Jurassic World merchandise that went on sale this year in conjunction with release of the motion picture, Clark said.

“It’s never an easy decision to lay off employees,” Clark said. “Mattel in a lot of ways is a close knit family. But for a variety of reasons it just made sense… Moving forward we’re very optimistic about Mattel’s prospects.”