Mattel: IP-Driven High-Performing Toy Company

Source: Mattel

Mattel Inc. delivered better-than-expected results for the second quarter of 2020, beating analysts’ estimates, but sending mixed — and sometimes confusing — messaging to those watching the toy industry.

In its Q2 earnings report, the El Segundo-based toymaker reported a sales increase of 3% in North America paired with a whopping 33% decline in international markets. Overall, sales for the quarter fell 15%. Likewise, year-to-date sales for Mattel are down 15%, while the U.S. toy industry as a whole was up 16%.

“We entered the second quarter with extensive retail closures and distribution challenges and had to absorb a full quarter of COVID-19 impact, but we demonstrated our execution capabilities and the resilience of our brands,” says Mattel Chairman and CEO Ynon Kreiz. “While revenues were down, they exceeded our expectations, particularly in North America, Barbie, and games, where we saw sales increases. Total company POS improved significantly and was positive in the quarter, and e-commerce continued to grow strongly in all regions.”

In the U.S., the sales increase was driven by dolls, most notably Barbie, which was offset by other brands such as American Girl. Action figures, building sets, games, and “other” were led by sales of Mattel’s 11-inch plush version of The Child from The Mandalorian and UNO. The seemingly unstoppable growth of Hot Wheels slowed down this quarter as the vehicles category took hits across Pixar Cars, Matchbox, and the Hot Wheels brands. In recent years, live events such as the Hot Wheels Legends Tour and Hot Wheels Monster Trucks Live fueled sales in the summer months. Due to COVID-19, those events have gone virtual or have been put on hold.

Curiously, Mattel showed double-digit POS increases for its infant, toddler, and preschool category, but still logged a 21% decline in an area that includes Fisher-Price and Thomas & Friends. A notable success is Power Wheels, which has boomed alongside strong demand for quality outdoor toys this year. According to Mattel President and COO Richard Dickson, soft sales in the Imaginext brand are partially to blame.

Future Outlook

“Based on the momentum we are seeing, the positive POS trends, and low retail inventories exiting the quarter, we are planning for strong demand for our products in expectation of improved revenue performance in the second half compared to the first half, including the all-important holiday season,” says Kreiz.

Mattel does have some strong product coming up for the holiday season — some of which was just shown at the Toy Insider‘s Sweet Suite @ Home — which should resonate with families this fall. The looming question has to do with what retail will look like in the event of another shutdown do to COVID-19.

Kreiz says part of that is e-commerce, which has grown in recent months, including efforts to go direct-to-consumer with a line of #ThankYouHeroes products and this week’s Comic-Con International: San Diego (SDCC) items which quickly sold out through Mattel Creations.

“The market shifted, or perhaps accelerated by a few years in terms of online retail,” Kreiz says. He notes that retail partners have stepped up in terms of digital sales and same-day pick-up options and that consumers are more inclined to give it a try.

Additionally, Kreiz took questions during a call with investors this afternoon. When asked about the company’s ever-expanding slate of motion picture and film projects, including Wishbonethe ninth project from Mattel Films — Kreiz played coy on firm plans for production or release dates.

“We haven’t announced any particular dates and we continue to do the work. We’re continuing to advance the projects we have in motion,” he said.