Mattel (MAT) shares took a significant hit during Thursday's trading session, plummeting 6.53% as investors reacted to a series of disappointing news from the toy manufacturing giant. The sharp decline came in the wake of the company's decision to cut its annual forecast and report a substantial drop in second-quarter revenue, compounded by ongoing concerns about the impact of tariffs on the toy industry.

After the market close on Wednesday, Mattel announced a reduction in its 2025 outlook, now projecting net sales growth of 1% to 3%, down from the previously estimated 2% to 3% increase. The company also lowered its adjusted earnings per share forecast to a range of $1.54 to $1.66, falling short of its earlier estimate of $1.66 to $1.72. This downward revision, coupled with a sharp decline in Q2 revenue, has raised concerns about Mattel's near-term performance and growth prospects.

Adding to the company's challenges is the broader issue facing the toy industry: the impact of tariffs on Chinese imports. With approximately 80% of toys sold in the U.S. originating from China, according to the Toy Association, Mattel and its competitors are grappling with a 30% blanket tariff. This has forced toy manufacturers to consider cost-cutting measures, including simplifying product designs, reducing accessories, and altering packaging - strategies that could potentially affect consumer perception and sales. As the crucial holiday shopping season approaches, investors appear increasingly wary of Mattel's ability to navigate these headwinds effectively, contributing to the significant stock price decline.