Mattel Inc (NASDAQ:MAT) Q1 2020 Earnings Conference Call - Final Transcript
May 05, 2020 • 05:00 pm ET
We successfully transitioned to a remote work structure for our employees working in 35 countries, implemented stringent measures to safeguard personnel at our plant and distribution centers, and temporarily closed our American Girl retail stores. We were able to ensure almost seamless business continuity, and remain, for the most part, in full work mode throughout the period.
Our back-office support functions rose to the occasion and supported the enterprise, while the organization stayed focused on the execution of our strategy. Our global supply chain organization has rapidly responded to the frequent and unpredictable changes occurring in various locations where we operate. We have taken mitigating actions to return our manufacturing and distribution operations to near-normal operating capacity, including in China, and we are taking similar actions in other parts of the world where necessary. The digital design systems that we recently implemented have enabled our design and development organization to innovate and collaborate remotely. We have maintained our business calendar, successfully executing our Spring 2021 Toy Fair virtually, allowing customers from around the world to engage with our category and commercial teams.
Our global commercial organization has also been working with our retail partners daily to navigate the dynamic landscape and evolving consumer path to purchase. We quickly developed and launched new promotions and marketing activation initiatives that were tailored to the new consumer behaviors, including our global Fun Ways to Play Together campaign on Amazon, a one-stop shop for families to search, discover and purchase our toys.
Our work over the past two years to develop a flexible and results-oriented organization is serving us well. We are confident about our path forward and remain focused on the execution of our strategy to transform Mattel into an IP-driven, high-performing toy company. At no time, in our 75-year history has our mission to create innovative products and experiences that inspire, entertain and develop children through play, been more vital than now.
Turning to our first-quarter performance. Our results were impacted by the global events that unfolded in February and March. Gross sales were $670 million, down 14% as reported and 12% in constant currency. Net sales were $594 million, down 14% as reported and 12% in constant currency. Reported gross margin was 43%, an improvement of 820 basis points. Adjusted gross margin was 43.5%, an improvement of 550 basis points. And adjusted EBITDA was negative $65 million, a decline of $44 million. In the midst of the disruption, we are encouraged by the continued improvement of our gross margin. This speaks to the progress we are making in optimizing our cost structure and restoring profitability.
Looking at our gross sales in constant currency for the quarter. While we expected higher retail inventories entering the year to have a negative impact on our revenues, the majority of the decline was COVID-19 related. This was driven primarily by the temporary closures of retail stores and distribution centers as well as retailers prioritizing essential items. By the end of the first quarter, more than