Mattel Is Banking On Barbie, And Her Long Game, To Beat Inflation | Techy Kings

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Mattel
MAT
CEO Ynon Kreiz’s message to Wall Street today is not to underestimate the power of Barbie, and the strength of Mattel’s turnaround plan.

Kreiz emphasized the positives after Mattel’s third-quarter earnings release on Tuesday left investors worried that inflation, and price-conscious consumers, could hurt the gains Mattel has made in recent years.

The morning after he reported mixed results, Kreiz, in a video interview posted on Yahoo Finance, said investors should read the full-year results as a sign the company’s turnaround strategy continues to drive profits, rather than a focus on the third quarter.

“We are in the midst of a challenging economic environment but the year to date results are double digit growth in net sales, adjusted EBITDA, adjusted operating income and adjusted eps [earnings per share] shows that we are successfully navigating a complex landscape and that our strategy is working,” said Kreiz.

“We believe our fundamentals are strong and we are very confident about our multi-year growth trajectory,” Kreiz said in the interview.

Mattel shares fell more than 4% in pre-market trading today, then regained some of their value, but remained down more than 2% heading into the final hour of trading. It closed today at $19.23, down 2.73%.

Mattel missed expectations for sales but exceeded expectations for earnings. Net sales were essentially unchanged at $1.76 billion, missing analysts’ estimates of $1.78 billion. After accounting for currency fluctuations, net sales rose 3% in constant currency, Mattel reported.

The company also cut its guidance on full-year earnings, cutting its forecast for adjusted earnings for the full year from $1.42 to $1.48 to $1.32 to $1.42.

What may worry Wall Street more than the numbers is Mattel’s admission that sales of Barbie, its top brand, declined 3% in the third quarter.

Much of the discussion on the company’s conference call Tuesday afternoon involved Barbie and her potential future earnings.

“There is a lot of doubt about whether Barbie can grow next year,” UBS’s Arpine Kocharian said on the call.

While Mattel executives expect the Barbie movie starring Margo Robbie and Ryan Gosling to break even, Kocharian noted that banking on a live-action movie “can be a little tricky.”

But Kreiz and Mattel President and COO Richard Dickson repeatedly emphasized their continued love for the Barbie brand during the call.

“We are very confident in Barbie for many reasons,” said Dickson. Among them is the continued growth that Barbie has enjoyed over the past five years. The brand has doubled in size during that period and has been the best-selling global brand overall for the past two years, Dickson said.

More encouragingly, Dickson said, despite the third-quarter decline, Barbie’s gross billings this year rose 3% in constant currency, encouraging growth on top of record sales in 2021.

And Barbie’s licensing potential seems limitless. Today, the Italian luxury automaker announced that it has teamed up with Mattel in what Maserati is calling a “bold collaboration” – a Barbie-themed ultra-limited edition luxury SUV created as one of Neiman Marcus’ fantasy holiday gifts.

A large part of Mattel’s growth strategy depends on expanding its reach into entertainment, and leveraging its brand power through an increasing number of film and television products.

Higher costs, particularly for ocean freight, and materials such as resin and zinc, hurt profit margins in the quarter, Mattel said.

But the company expects sales to pick up in the fourth quarter, and consumers this year will return to pre-pandemic patterns to do much of their shopping this holiday season.

Kreiz is confident that Mattel is well positioned for a successful fourth quarter and holiday season.

“We believe that big brands that matter, quality products will ultimately win this season,” he said during a conference call. “This is what we focus on. This is where we excel.”

And the biggest brand Mattel is betting on for a fourth-quarter win, and 2023, is Barbie.

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