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Barbie may be on top of girls’ holiday wish lists this year but that has not been enough to keep Mattel from issuing a bleak holiday outlook.

The US toymaker on Monday revised its outlook for the full-year, warning that sales in the holiday quarter will continue to be “negatively impacted” by tighter inventory at key retailers and as a result of its underperforming brands.

Mattel said in a filing with the Securities and Exchange Commission that it expects 2017 full-year gross sales to decline by mid-to-high single digits compared with the previous year when they fell 3 per cent. That is also a sharper drop from its previous guidance for a mid-single digit decline.

The company, which suspended its dividend earlier this year and has repeatedly rebuffed takeover offers from Hasbro, also said negative sales trends could result in “additional gross margin deterioration” and that its operating income margin, excluding severance related expenses, will be “significantly lower” than the fourth quarter of 2016. Mattel also said it plans to offer $1bn of senior unsecured notes due in 2025 and use the proceeds to repay debt due next year and other outstanding borrowings.

The holiday shopping season, which begins the week of Black Friday and continues through the end of the year, accounts for 35 to 40 per cent of the toy industry’s sales. Analysts have cautioned that consumers may choose to delay purchases this year as Christmas falls on a Monday, which could prompt many to delay shopping to the weekend immediately prior to the holiday.

The bleak trading outlook and planned debt offering prompted the three major rating agencies to downgrade their view on the company.

Moody’s stripped Mattel of its investment grade status, lowering its rating its ratings to ‘Ba3″ from ‘Baa3′ with a stable outlook. Analysts at the agency cited the “company’s weak performance year to date, and recently lowered profit expectations for the important 2017 fourth quarter holiday season,” which will contribute to much higher than expected year-end leverage. Meanwhile, S&P Global Ratings, pushed Mattel deeper into junk territory, cutting its rating by one notch to ‘BB-’ from ‘BB’, with a negative outlook. While Fitch also junked the company after it slashed its ratings by 2 notches from ‘BBB-’ to ‘BB’, with a negative outlook.

Traditional toymakers have faced stiff competition as the industry become more fragmented with companies like Spin Masters, MGA Entertainment and upstarts like Moose Toys all battling for children’s attention and as children opt for games on devices like iPads and tablets.

Mattel has also suffered after it lost the license for Disney Princess and Frozen dolls to Hasbro while its efforts to overhaul existing brands have failed to gain enough traction to offset those declines. The company hired Margo Georgiadis, one of Google’s top advertising executives earlier this year to help lead the toymaker in an evolving digital world and trim its underperforming brands. But the company’s inability to effectively respond to changing play patterns and the recent Toys R Us bankruptcy have dragged on sales, leaving Hasbro on track to surpass Mattel’s annual sales for the first time since 1993.

Despite the deluge of disappointing news Mattel shares were up 1 per cent to $15.20 at pixel time and are down 45 per cent so far this year.

Read more: Toymakers rethink traditional playbook

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