Mattel has announced a disappointing full-year profit forecast, falling below Wall Street’s expectations following a lacklustre performance in the fourth quarter. The toy giant’s shares plummeted by approximately 21% in after-hours trading, as persistent inflation and cautious consumer spending continue to dampen demand for toys during the critical holiday season.
Weak Consumer Confidence Affects Sales
The festive shopping period, typically a boon for toy manufacturers, saw U.S. shoppers adopting a more restrained approach, influenced by ongoing economic uncertainty. CEO Ynon Kreiz noted that heavy discounting in December significantly impacted profit margins, with U.S. sales growth proving to be “less than expected.”
As consumers tightened their belts, Mattel experienced a 7% rise in fourth-quarter net sales, totalling $1.77 billion. However, this still fell short of the anticipated $1.84 billion. Adjusted earnings per share also disappointed, coming in at 39 cents compared to the expected 54 cents. Meanwhile, rival Hasbro has similarly forecasted modest revenue growth for the year despite surpassing fourth-quarter projections.
Strategic Moves for Future Growth
In a bid to reinvigorate its brand portfolio, Mattel is focusing on expanding its entertainment offerings. Following the phenomenal success of the 2023 Barbie film, the company plans to launch a live-action *Masters of the Universe* film in June, along with a *Matchbox* movie set to debut on Apple TV in October. Kreiz expressed optimism about leveraging their intellectual properties, particularly in high-margin areas such as gaming and digital entertainment.
To further this goal, Mattel has revealed plans to acquire the remaining 50% of Mattel163, a media games joint venture with China’s NetEase, for $159 million. This acquisition is expected to enhance Mattel’s capabilities in self-published digital gaming, with Kreiz stating, “We’re looking to capture the full value of our intellectual properties in high-margin, highly accrued areas.”
Financial Updates and Future Outlook
Despite the challenging market conditions, Mattel announced a robust $1.5 billion share buyback programme, expected to be completed by 2028. Additionally, the company has successfully mitigated the impact of U.S. tariffs through strategic supply-chain diversification and product optimisation.
Looking ahead, Mattel anticipates adjusted earnings per share in the range of $1.18 to $1.30 for 2026, significantly below the average analyst estimate of $1.75. The company’s sales are projected to grow between 3% and 6% this year, buoyed by an estimated $150 million in revenue from the acquisition of Mattel163. Furthermore, a multi-year licensing agreement with Paramount Skydance will see the development of *Teenage Mutant Ninja Turtles* products commencing in 2027.
Why it Matters
Mattel’s current struggles highlight the broader challenges facing the toy industry amid economic headwinds, such as inflation and changing consumer behaviours. The company’s strategic pivot towards digital gaming and film franchises might be critical for future profitability. As competition intensifies, how effectively Mattel navigates these turbulent waters could determine its standing in the global toy market moving forward.
