According to the law firm press release, the complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Mattel’s business and prospects, including that prior to and during the Class Period, Mattel’s retail customers were loaded with extremely high levels of unsold Mattel product and, as a consequence, Mattel was exposed to the heightened risk that it would have to issue its retailers financial concessions (in the form of sales adjustments, discounts and promotions) to remove such excess inventory, as well as the heightened risk that Mattel would experience slower sales growth in future periods. As a result of defendants’ false statements and/or omissions, Mattel shares traded at artificially inflated prices of more than $33 per share during the Class Period.
Then, on April 20, 2017, after the close of the market, Mattel announced its first quarter 2017 financial results, reporting that, on a year-over-year basis, worldwide net sales and gross margins each declined by more than 15%, and its operating loss increased by more than 158% to $127.0 million from $49.1 million. Mattel’s first quarter 2017 results were significantly below Wall Street consensus estimates. In fact, Mattel’s 15% net sales decline during the quarter was twice the 7.8% decline expected by Wall Street analysts and its reported first quarter 2017 gross margins were 520 basis points less than expected Wall Street consensus estimates. In response to these revelations, the price of Mattel stock fell nearly 14%, or $3.42 per share, on heavy trading volume to close at $21.79 per share on April 21, 2017.
On September 29, 2017, the Court issued an Order consolidating cases and appointing Lead Plaintiff and Counsel. Lead Plaintiff filed a consolidated Complaint on November 28. Defendants filed a Motion to Dismiss the consolidated case on January 24, 2018. On May 24, the Court issued an Order granting Defendants' Motion to Dismiss. Lead Plaintiff was given leave to file an amended Complaint.