Mattel Inc. (NASDAQ: MAT) has seen its stock gain 70% over the past 12 months and 12% since the beginning of the year. The company exited 2020 on a strong note and remains on track to continue this momentum over the mid to long term. On Wednesday, at its analyst day, Mattel provided an update on its strategic priorities and its outlook. The company’s power brands, pipeline of catalogue IP and entertainment partnerships form a key part of its growth strategy.
In 2020, the global toy industry grew 10% and according to NPD, the toy industry in the US witnessed strong growth. Mattel’s growth outperformed the industry during the third and fourth quarters of 2020. The majority of growth in the industry was driven by categories such as outdoor, games and puzzles and building sets as demand picked up during the COVID-19 pandemic-related lockdown.
Strong brand portfolio
According to NPD, dolls is an $8 billion super category. Mattel has a strong position in the dolls business driven by the solid performance of its Barbie and Polly Pocket brands. During 2020, Barbie saw a 30% growth in POS globally. In dolls, product innovations with a focus on social issues as well as entertainment partnerships are expected to help drive growth in the coming years.
Another key growth category for Mattel is vehicles. NPD estimates the vehicles category at $3.7 billion, up 8% in 2020. Mattel expects to drive growth in this segment through its Hot Wheels and Matchbox brands as well as its Disney-Pixar Cars partner brand.
Games and puzzles recorded the highest growth among categories during 2020 due to high demand amid the pandemic. Data from NPD shows that games, which stands at $6.9 billion, grew 24% globally. Mattel’s UNO, Pictionary and Scrabble brands witnessed high double digit growth during the year.
Mattel also has a significant growth opportunity in the $2.5 billion plush category with The Child, made extremely popular by the Disney + series The Mandalorian. The company continues to add products in this category based on other entertainment franchises and sees vast potential in this space.
Mattel generated $1 billion in cost savings during 2020 through its Structural Simplification and Capital Light programs. The company remains on track to generate additional savings of $250 million by 2023 through its multi-year Optimizing for Growth program. Of this, $75 million is expected to come through in 2021. The Optimizing for Growth program is expected to play a key role in driving profitability for the company.
For 2021, Mattel expects revenue to grow mid-single digits in constant currency, driven mainly by growth in dolls, vehicles and action figures. Adjusted EBITDA is estimated to range from $775-800 million, reflecting a growth of 8-11% versus 2020. The company aims to grow revenue in the mid single-digits range in constant currency for 2022 and 2023 and is looking to deliver a mid-teens adjusted operating income margin by 2023.
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