(This column originally appeared at 11:36 a.m. ET on Real Money Pro, our premium site for active traders and Wall Street professionals. Click here to get great columns like this even earlier in the trading day.)
1. I have followed both companies for several decades. A few years ago Mattel lost the all-important Disney (DIS) account to Hasbro (HAS) , but still possessing the powerful brands of Barbie and Fisher Price, it remains a good bellwether for the U.S. consumer
Mattel released its fourth-quarter results today, ahead of the scheduled Feb. 1 release date, and the results were devastatingly bad.
The results could have broad and adverse ramifications for the retail industry.
By means of background, third-quarter sales were flat. Reported 4Q 2016 sales were down 8%, a rare and significant DECELERATION. What this means is that trade reorders did not happen.
Matted ended the quarter and year with significantly more than planned for inventories, signaling a weak trade environment. The company's report also confirms the high likelihood of a weak quarter at Walmart (WMT) and Target (TGT) .
2. Separately, both Moody's and Fitch have downgraded Sears paper. This was in spite of the planned sale of the Craftsman brand. The ratings agencies cited a still significant expected cash burn in 2017. Sears was a large customer of Mattel, and I suspect the toy maker may have refused to ship to Sears.
Sears shares declined another 7% today in morning trading, and the Moody's downgrade came out after the close.
3. Though Edward Lampert has pulled several rabbits out of his hat, Sears' cupboard is now almost bare.
I now believe -- as I predicted in my "15 Surprises for 2017" -- that a financial event at Sears may be imminent. If I am correct, a large portion of the retailer's stores will be closed and with this, about 100,000 jobs will likely be eliminated in bankruptcy.