Mattel on Thursday reported that third quarter net sales fell 8% (6% in constant currency) to $1.44 billion, with net sales in North America rising 4%. North America gross sales rose 6%, the highest rate in the region since the fourth quarter of 2015, despite a 3% negative impact from Toys R Us and primarily driven by strong Barbie sales, according to a company press release.
By segment, gross sales for Mattel Power Brands fell 5% (2% in constant currency) to $1.08 billion; for the Barbie brand rose 14% (17% in constant currency, and the fourth straight quarter of growth); for the Hot Wheels brand fell 6% (3% in constant currency); for the Fisher-Price and Thomas & Friends brands fell 12% (10% in constant currency), for the American Girl brand plummeted 31%.
Operating income in the quarter rose 41% year over year to $122 million, the first time in eight quarters that the company has posted year-over-year growth, the company said.
Despite a dispiriting plunge in sales for its American Girl brand, Mattel is getting out from under the troubles brought on by the demise of Toys R Us, with plans to diversify operations — and monetize brands — with a new theatrical film division.
Judging from its bestselling toys — CEO Ynon Kreiz on Thursday on a conference call with analysts said there’s "particular strength in Barbie and Jurassic World" going into the holiday season. Those brands are likeliest to flicker on the big screen.
The company's "fundamental turn [is] continuing to progress," Wells Fargo analysts led by Timothy Conder said in comments emailed to Retail Dive. The company is fairly well protected against tariffs, considering that, while 85% of the industry's toys are made in China, less than two-thirds of Mattel products are, they also said.
After being scorned by feminists for decades, the Barbie brand (which turns 60 next year) has been repositioned with a diversity of skin tones and body types for wider appeal. And it's now the company’s standout.
"Barbie was the number one global fashion doll property year-to-date through September," Kreiz told analysts, citing The NPD Group, according to a transcript from Seeking Alpha. And he expects continued momentum over the holidays.
The toy maker appears to be moving smoothly out of the shadow of the Toy R Us bankruptcy, and Kreiz said the iconic retailer’s downfall is being mistaken by many as a lack of demand for toys.
"This is not a reflection on the rest of the industry and people do confuse that," he said. "[N]ow, fundamentally speaking, the fact that one retailer is out of business doesn't mean that consumers will change what they do, what they consume, and the toys they like. The market will realign over time and based on what we know, we expect growth to continue in the industry."