After ‘Barbie’ boom, Mattel is cutting costs — and buying back stock

Shares of Mattel were up 0.7% after hours.

Scores of companies, within and outside of the toy industry, have announced cost-cutting efforts over the past several weeks, as investors seek out bigger profit margins following a year in which recession concerns hung over the economy. Hasbro Inc.
HAS,
+1.34%,
one of Mattel’s main rivals, said in December that it was planning layoffs.

Toy demand has cooled thanks to two years of inflation-fueled price hikes for basic necessities. Retailers have taken a cautious approach toward stocking their shelves, after getting caught two years ago with too many toys and electronics that people didn’t want.

On Mattel’s fourth-quarter earnings call on Wednesday, Chief Executive Ynon Kreiz said trends in the toy industry this year wouldn’t be as bad as last year.

“We expect the toy industry to decline in 2024, although at a lesser rate than 2023,” he said. “The anticipated decline is due to a lighter [toy-related] theatrical-film slate and the impact of the shift in consumer-spending patterns towards experiences and services, which we believe will moderate over the year.”

Chief Financial Officer Anthony DiSilvestro said on Mattel’s call that the company expects a decline in doll sales this year “as we wrap the benefits of the ‘Barbie’ movie.”

Mattel — known for its Barbie and Hot Wheels toys and, increasingly, its efforts to turn them into content — reported fourth-quarter net income of $147.3 million, or 42 cents a share. That compares with net income of $16.1 million, or 4 cents a share, in the same quarter in 2022.

Adjusted for things like severance, product recalls and changes to deferred tax assets, Mattel earned 29 cents a share. Sales rose 16% to $1.62 billion.

Analysts polled by FactSet expected Mattel to report adjusted earnings per share of 31 cents, on revenue of $1.65 billion.

“Execution on our toy strategy was strong and we made meaningful progress in entertainment across film, television, digital and publishing,” Kreiz said in the company’s earnings release.

“We ended 2023 with the strongest balance sheet we have had in years, putting us in an excellent position to execute our strategy to grow Mattel’s IP-driven toy business and expand our entertainment offering,” he continued.

Mattel reported earnings after the key holiday-shopping season, and as analysts weigh the sales impact from the success of the “Barbie” movie released last summer. Mattel executives have said they want to make more films based on some of its other popular toys, and turn “Barbie” into a film and TV franchise.

The Wall Street Journal reported last week that activist investor Barington Capital had taken a stake in Mattel, noting that Barington believes the company should consider “pursuing strategic alternatives” for its Fisher-Price and American Girl businesses. Mattel on Wednesday said that American Girl would be folded into its North America commercial organization.

Bank of America analysts on Tuesday said Mattel and Hasbro were among the companies that were “most at risk of direct impact” from shipping disruptions in the Red Sea. Yemen-based Houthi fighters opposed to Israel’s war in Gaza have attacked ships in the area, forcing lengthy detours and driving up shipping costs. Mattel, the analysts noted, got around 24% of its total sales from the Europe, Middle East and Africa regions in 2022.

DiSilvestro said during Mattel’s earnings call that, so far, the disruptions and higher shipping costs had “not had a material impact” on the company.

Shares of Mattel are up 24.7% over the past 12 months.