Shares in the company have climbed after it logged its first revenue gain in two years.
Gross Sales in the International segment increased 3%, primarily driven by growth in Action Figures, Building Sets and Games (including Toy Story 4, partially offset by Jurassic World), Dolls (including Barbie and Polly Pocket, partially offset by Enchantimals), and Vehicles (including increased sales for Hot Wheels, partially offset by lower sales for Cars and Jurassic World vehicles). This growth was partially offset by a decline in Infant, Toddler and Preschool (including Fisher-Price Core and Thomas & Friends).
The company still hasn’t returned to profitability, reporting an adjusted loss per share of 25 cents, but the results are much better than the 40-cent loss Wall Street had been forecasting. Mattel remains “on track to restore profitability and regain top-line growth in the short to midterm,” its CEO Ynon Kreiz said. “We’re making real, tangible progress,” he said in an interview.
After a little more than a year on the job, Ynon is making the case that he’s stabilised the toymaker following five straight years of revenue declines. Ynon, who spent his career in Hollywood before joining Mattel, has been trying to transform Mattel into an IP-driven company, an approach that competitor Hasbro has successfully deployed.
Mattel will face challenges ahead. Barbie – which saw a double-digit spike that helped drive Mattel’s North American sales up 2.5% – has more competition in store, with Hasbro’s new Frozen dolls expected to launch during the holiday season, and a number of new doll ranges from MGA also set to launch. Mattel’s Hot Wheels brand also declined in its home market, a rare occurrence for a usually strong property.
Ynon also said on Thursday that Mattel has already exceeded his $650m cost-cutting initiative for 2019 and now boasts a run-rate savings of $754m. It expects to shave off another $100m by year-end.
Joseph Euteneuer, CFO, Mattel, added: “We continue to move towards our goal to restore profitability and regain topline growth in the short-to-mid term, and to capture the full value of our IP in the mid-to-long term. The benefits of the team’s hard work are clearly materialising across the P&L. We remain focused on sustained progress, methodical execution and the creation of long-term shareholder value.”
Mattel’s shares rose 5% as of 4:08 p.m. in New York. They had already climbed 25% through Thursday’s close.