Mattel beats profit estimates on cost controls but trims annual sales forecast

MATTEL topped Wall Street estimates for quarterly profit as the Barbie parent kept a tight leash on costs but lowered its annual sales forecast heading into the crucial holiday shopping season against the backdrop of muted demand for toys.

Its shares were up more than 4 per cent in extended trading on Wednesday (Oct 23). Rival Hasbro, set to report results before markets open on Thursday, rose 2 per cent.

Mattel expects to generate cost savings of about US$75 million this year, after surpassing an earlier goal of US$60 million within the first nine months.

“Mattel is hitting its marks at a challenging time for the toy industry,” said Emarketer analyst Zak Stambor.

The Hot Wheels parent has turned to tighter cost controls to ride out sluggish demand, with sales falling for the third straight quarter this year. It has set a target of US$200 million in savings by 2026 through efforts such as streamlining its supply chain and trimming its product lines.

It now expects 2024 net sales to be in the range of flat to down slightly from last year’s US$5.44 billion, compared with its prior estimate of flat on a constant currency basis.

“Aggressive pricing and markdowns at retail could impact sales heading into the holiday season and I believe the company is being cautious of that,” said James Zahn, editor in chief at The Toy Book magazine.

Meanwhile, Mattel raised its annual adjusted gross margin expectation to 50 per cent from a prior range of 48.5 to 49 per cent.

Net sales declined 4 per cent to US$1.84 billion, missing expectations of US$1.86 billion, according to data compiled by LSEG.

Worldwide gross billings for its Dolls category slumped 14 per cent, primarily driven by weaker Barbie sales as a boost from last year’s Barbie movie release tapered off.

Mattel, which is focusing on intellectual property partnerships for its popular brands, earned US$1.14 per share on an adjusted basis, beating estimates of 95 US cents. REUTERS