Shares of Mattel Inc. (NASDAQ: MAT) were down 1% on Friday. The stock has gained 7% year-to-date and 5% over the past 12 months. The toymaker delivered decent results in a challenging environment which boosted an optimistic sentiment around its growth prospects. Here are a few points to note if you have an eye on this stock:
Revenue and profitability
Mattel achieved revenue and profit growth for its most recent quarter despite inflationary pressures. Net sales for the second quarter of 2022 grew 20% year-over-year to $1.23 billion, helped by a strong product portfolio.
The company reported double-digit sales growth in both its North America and international markets. It also witnessed growth in all its categories, led by robust performance in Action Figures. Gross billings grew 20% YoY on a reported basis with gains across all its categories and most of its regions.
Adjusted EPS rose to $0.18 in Q2 from $0.03 in the year-ago period. Operating income jumped 155% YoY to $125 million but gross margin fell 310 basis points to 44.4% due to cost inflation. The impacts of inflation were partly offset by pricing during the second quarter and the company has undertaken additional pricing actions which are expected to take effect in the latter half of 2022.
Strong brand portfolio
Mattel has a strong brand portfolio that continues to perform well and is capable of driving further growth for the company. During the second quarter, the company recorded gross billings growth across both its leader and challenger categories.
The Dolls category saw a 2% increase in gross billings, led by Barbie and Polly Pocket. Barbie grew only 3% but this was due to a decline in some of its high price-point items like the Dreamhouse. Double-digit gains in popular brands such as Hot Wheels, Fisher-Price and Thomas & Friends helped drive strong billings growth in the Vehicles, and Infant, Toddler, and Preschool categories.
The challenger categories delivered the highest growth with strong performances from Action Figures and Building Sets. Gross billings rose 44% in Q2 helped by double-digit gains in Building Sets and growth in Action Figures, led by Jurassic World and Lightyear.
Mattel’s strategy to grow its IP-driven toy business and expand its entertainment offerings provides it with significant potential for growth going forward. The upcoming Barbie movie, slated to release next year, is likely to help boost sales for the all-time favorite doll. The company also has movies and TV shows based on brands and franchises such as Matchbox, Monster High, and He-Man and the Masters of the Universe coming up, which provide further growth opportunity.
Mattel expects growth to continue in the second half of 2022. The company expects net sales for FY2022 to increase 8-10% in constant currency, driven by growth in both the leader and challenger categories.
Gross billings are expected to grow in the Dolls, Vehicles, and Infant, Toddler, and Preschool categories led by Polly Pocket, Hot Wheels, Fisher-Price and Thomas & Friends. Strength in Action Figures is expected to drive billings growth in the challenger categories. Adjusted EPS is expected to be $1.42-1.48.
For FY2023, net sales are expected to increase in the high single digits in constant currency while adjusted EPS is expected to be higher than $1.90.
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