Toy maker Mattel posted a surprise profit in the second quarter. Shares edged lower in after-hours trading.
Mattel (ticker: MAT) posted $1.09 billion in revenue, marking a decrease from the same quarter last year but beating analysts’ expectations of about $1.02 billion. The company also posted adjusted earnings per share of 10 cents, a 44% decrease from a year ago but better than the 3 cents a share loss that analysts surveyed by FactSet projected.
Shares were down 2.2% Wednesday evening.
The company’s adjusted gross margin of 44.9% was flat compared with the previous year. Mattel also reiterated its 2023 guidance of adjusted earnings per share between $1.10 and $1.20.
Mattel posted a loss per share of 30 cents during the first quarter as consumers continued to exercise caution over their discretionary spending on toys. Second-quarter results continued to be negatively impacted by retailers’ management of inventory levels and overall industry softness, said Mattel chief financial officer Anthony DiSilvestro.
The company saw a drop off in gross billings in North America during the second quarter, notching an 18% decline. Gross billings for the company’s dolls category increased by 10% and were driven by increased purchases of Disney Princess, Frozen, and Monster High products. Sales of Hot Wheels sets, a recent bright spot for the company, also increased.
But Barbie, the company’s most well-known doll and a smash hit at the box office, saw a 7% decline in sales. Executives attributed this to their shift in the doll’s promotion schedules to better align with the Barbie movie’s theatrical release. The company’s guidance includes significant growth for Barbie sales in the second half of the year.
Mattel chief executive Ynon Kreiz said second-quarter earnings were in line with his expectations, but reiterated the quarter was even more important for the company’s overall media strategy. The Barbie movie marked Mattel’s first litmus test of its strategy for monetizing its intellectual property in the entertainment industry.
“This moment will be remembered as a key milestone in our company’s history,” Kreiz said in a written statement.
Analysts tracking the stock have remained upbeat about the buzz surrounding the Barbie movie and its potential to positively impact Mattel in the second half of 2023. The film’s hype fueled high expectations—boosting the stock ahead of opening weekend and reigniting consumer enthusiasm for the doll—and smashed box office expectations.
But the windfall from the Barbie tie-in won’t show up in the company’s numbers for a while. Analysts predict the film’s biggest financial upside for Mattel will be the high-margin revenue from dozens of Barbie movie licensing partnerships. Those deals will surface more in the company’s financials during the third and fourth quarter of 2023.
During Mattel’s earnings call, multiple analysts wanted to know what is next for the Barbie movie franchise, as well as the 14 other films the company is currently developing based on its other popular brands. Executives expressed optimism around their ability to replicate the film’s marketing efforts.
“We’re not saying every movie will achieve the same level of success, but we absolutely plan to execute the same strategy, the same approach, the same methodology,” Kreiz said during the earnings call. “One of the takeaways of the success of the Barbie movie is our ability to execute our demand creation expertise outside the toy aisle.”
The first of Mattel’s follow-ups to Barbie, a Hot Wheels film, is due for release December 2025. Executives have not announced a timeline for the rest of the lineup.
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