Mattel announces cost cuts after fourth-quarter results miss expectations

Shares of Mattel
MAT,
+1.57%
were up 1.5% after hours.

“Looking ahead, we are launching a new cost-savings program focused on profitable growth and expect to improve profitability and continue share repurchases in 2024,” Mattel Chief Financial Officer Anthony DiSilvestro said in the company’s earnings release.

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,” Chief Executive Ynon 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 try to gauge 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 franchise.

However, toy demand has been cooler recently, thanks to two years of inflation-fueled higher prices for goods and 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.

The Wall Street Journal reported this month that activist investor Barington Capital had taken a stake in Mattel, adding that Barington believed the company should consider “pursuing strategic alternatives” for its Fisher-Price and American Girl businesses.

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.

During a conference in December, Kreiz said he believed in the long-term growth of the toy industry. But he said that after a jump in growth between 2019 and the pandemic, 2023 would likely be tamer.

“We believe 2023 will be back to normal in terms of shopping patterns and consumer behavior,” he said. “And also even inventory at the retail level and at our level is now reverting back to historical norms.”