Mattel (MAT): Three factors that work in favor of this toy company

Shares of Mattel Inc. (NASDAQ: MAT) were up 1.2% in afternoon hours on Tuesday. The stock has gained 29% since the beginning of this year and 96% over the past 12 months. Although it took a hit to sales during the pandemic, the company has recovered since then and delivered solid results for its most recent quarter. Here are three factors that work in favor of the toymaker:

Strength in core brands

Mattel continues to see strong performance within its core brands. The Dolls category saw a 47% year-over-year growth in gross billings on a constant currency basis during the second quarter of 2021. This growth was fueled by strong performances from brands like Barbie, American Girl, and Polly Pocket. Barbie grew 41% while American Girl grew 43%. According to data from NPD, Mattel’s Dolls category gained 4.5 share points in Q2.

Gross billings increased 62% in Vehicles with Hot Wheels growing 61%. Infant, Toddler and Preschool rose 12% fueled by Fisher-Price and Thomas & Friends. Gross billings for the Action Figures, Building Sets, Games and Other categories grew 28% on a combined basis.

Action Figures saw gross billings more than double, driven by Jurassic World, while Building Sets witnessed double-digit growth, helped by MEGA Bloks. The Games category, which did well during the pandemic, posted a double-digit decline due to tough comps in the year-ago period.

Opportunity in entertainment

Mattel is working on driving demand for its products through partnerships with entertainment companies such as Disney, Nickelodeon, Nintendo, Universal and Warner Bros. The company’s Plush category witnessed double-digit gross billings growth driven by strong demand for The Child product which gained popularity with the series The Mandalorian and the Star Wars franchise.

Mattel has licensing agreements with the aforementioned companies for several properties in 2022 and beyond and the company sees significant potential for its Matchbox, Monster High and Masters of the Universe brands.

The Barbie animated special titled Big City Big Dreams will launch on Netflix in September. The company has partnered with MGM to develop Polly Pocket into a live-action motion picture. A new Barbie feature movie will go into production next year with a release targeted in 2023.

Upbeat outlook

Mattel raised its full-year guidance for net sales and adjusted EBITDA. The company now expects net sales for FY2021 to increase 12-14% in constant currency, driven by growth in Dolls, Vehicles, Action Figures and Building Sets. Mattel also expects to see growth in the Barbie, Hot Wheels and Fisher-Price and Thomas brands. Mattel expects adjusted EBITDA to range between $875-900 million.

The toy industry is expected to see meaningful growth in the coming years. According to Euromonitor, the industry is estimated to grow at a CAGR of 5.4% over the next five years through 2025. Mattel remains confident that it can grow its market share in this environment.

Click here to read the full transcript of Mattel’s Q2 2021 earnings conference call