• by Sarah Mahoney  @mahoney_sarah, December 12, 2017

Santa’s sack may not be quite so full of toys after all, with Mattel warning that its fourth-quarter sales are slumping. The El Segundo, Calif.-based toy company says the decline is due to problems at key retailers, as well as “certain underperforming brands.” It says it’s now sharpening its ad focus on power brands and most-profitable opportunities, and that it expects full-year sales will drop by “mid- to high-single digits.”

While it’s not exactly coal in the stocking, the news was enough to cause S&P Global Ratings to lower the toy maker’s credit rating. “We believe Mattel's planned operational turnaround and deleveraging path will take significantly longer than we previously forecasted, and risks in Mattel's business operations remain heightened related to poor product sales performance,” it says, citing both the American Girl and Thomas line as weak spots.

Fitch also lowered its credit rating, citing ongoing operating weakness. “The company has also been challenged by the phenomenon of children — in particular, girls — outgrowing traditional toys at a younger age, with greater interest in consumer electronics, beauty, sports, and social media. Mattel's traditional toy portfolio, including Barbie, has had difficulty effectively retaining mindshare as this phenomenon progresses.”

The updated outlook comes on the heels of disappointing third-quart results. Back in October, the company reported a worldwide sales decline of 14%, in part due to the bankruptcy of Toys R Us. Global sales for Barbie dropped 6%, while sales for other girls’ brands fell 40%. And in the Wheels category sales slipped 4%.

And NPD Group predicts that of the 10 hottest-selling toys this season, just two — Barbie Dreamhouse Playset and Hot Wheels Singles 1:64 Assortment — are from Mattel. Three are from rival MGA Entertainment L.O.L. Surprise! Doll line.