Toymaker Mattel Inc (MAT.O) said it would suspend its quarterly dividend from the fourth quarter and use the money to beef up its faltering business after a hit from the bankruptcy of its largest retailer Toys'R'Us.

Shares of the company, which also reported disappointing third-quarter results on Thursday, were down 25 per cent in after-market trading, wiping away a quarter of its market value.

The suspension of its quarterly dividend of 15 cents a share is expected to save $50 million per quarter, the world's biggest toymaker said.

"Our Q3 performance was clearly disappointing, led by compression in North America, driven by Toys'R'Us filing for bankruptcy, tighter retailer inventory management and challenges with certain underperforming brands," Mattel's Chief Executive Margo Georgiadis said.

Under Georgiadis, who became the CEO in January, Mattel had earlier decided to cut dividend payout by more than 60 percent. The company also replaced its veteran Finance Chief Kevin Farr last month.

Net sales fell 13 per cent to US$1.56 billion in the third quarter ended Sept. 30, hurt by weak demand across its core categories such as Barbie, Hot Wheels, Thomas & Friends and Monster High.

Analysts on average had expected US$1.81 billion, according to Thomson Reuters I/B/E/S.

The company said it posted a net loss of US$603.3 million, or $1.75 per share, in the third quarter, compared with a profit of US$236.3 million, or 68 cents per share, a year earlier.

Toys'R'Us bankruptcy and higher freight expenses weighed on Mattel's gross margins for the quarter, which fell 7 percent.

The bankrupt toy retailer, which contributed 11 per cent to Mattel's revenue in 2016, owes US$135.64 million in the form of unsecured claims to Mattel, according to a bankruptcy filing.

Toys'R'Us filed for bankruptcy in September and owes $5 billion to creditors. The retailer is set to receive US$3.1-billion debtor-in-possession financing, which is likely to help the toy retailer pay some of its suppliers such as Mattel and keep 1,600 stores in operation for the crucial holiday season.

Smaller rival Hasbro, which reported robust quarterly results but said it expected a weaker holiday quarter, had also pinned the blame to the toy retailer's bankruptcy.