Mattel braces for turbulent finish to year's final quarter
Mattel Reports Flat Sales, Slight Year-Over-Year Operating Profit Increase in Q3
Mattel, the renowned toymaker, disclosed that its sales remained stagnant at $1.8 billion during the third quarter, while its operating profit rose slightly compared to the same period last year, as stated in a company release. After adjusting for restructuring costs, asset sales, and other one-time events, the company's operating income decreased by 1%.
For the entire year, Mattel, taking into account market volatility, revised its guidance on margin and profits. The lower end of its adjusted EBITDA range was reduced by $50 million. In a call with analysts, Mattel's CEO, Ynon Kreiz, shared that the company, based on its research, expects consumers to continue spending as much or more during the holiday season compared to 2021.
Kreiz projected some optimism despite Mattel's earlier indication of lower profit this year and potential adjustments to its expectations for 2023. Mattel anticipates growth on the top line, with estimates suggesting an 8% to 10% increase in net sales. The majority of this growth is expected to stem from some of Mattel's top brands, such as Hot Wheels, Fisher-Price, and Thomas & Friends.
On the call, Kreiz highlighted the sector's historical resilience during economic turbulence. The company was also ranked as the No. 1 toy company in the US and globally in its leading categories in Q3, according to NPD data.
Mattel forecasts a decrease in profit margins for the year. However, the company estimates its adjusted EBITDA and earnings to grow over last year. In Q3, Mattel could boast an increase in its gross margin, with price increases and cost cuts counteracting inflation in the company's own costs. Kreiz stated that the company had successfully implemented price increases for customers during the year with no significant impact on consumer demand thus far.
However, Mattel faces challenges, particularly in profit. The company attributed these challenges to a complex macroeconomic environment with higher volatility, including inflation, which could impact consumer demand. Mattel also warned of potential further volatility in areas like exchange rates, global economic conditions, consumer demand, and labor market fluctuations.
Mattel's performance compared to its rivals is noteworthy. While it is weathering the current environment with less financial pain than Hasbro, rival toy company, which suffered a more than 30% drop in operating profit in its consumer products unit in Q3 and overall sales decline by 15%. Meanwhile, Funko, another toy company, reported a decline in sales, with Q1 net sales dropping more than 11%.
In conclusion, Mattel's holiday season sales for 2025 are uncertain due to the impact of tariffs and a volatile macroeconomic environment. Although Mattel started 2025 with a solid start, the lack of specific 2021 holiday season sales data makes a direct comparison challenging. Competitors like Hasbro and Funko have shown mixed performance, with Hasbro maintaining its forecasts and Funko experiencing a decline in sales.
- To tackle potential challenges in the coming quarters, Mattel is planning to conduct research on the impact of artificial intelligence and automation in the labor market, aiming to adapt its strategies accordingly.
- In light of increasing environmental concerns, Mattel is also investigating ways to minimize its carbon footprint, striving to make its operations more sustainable and eco-friendly.
- With the volatile weather patterns expected in the near future, Mattel is analyzing the impact on its supply chain and seeking solutions to mitigate potential disruptions.
- As part of its long-term financial strategy, Mattel is keeping a close eye on the global economic trends, including inflation rates, to make informed decisions that protect its profits and maintain competitiveness within the industry.
