While acknowledging some challenges ahead, Anthony DiSilvestro, CFO of toy company Mattel, remained bullish on his company’s future, pinning his hopes on strong third and fourth quarters this year to compensate for anticipated sales and earnings declines in the first and second.
The El Segundo, California-based company has been struggling with both changing consumer habits and macroeconomic headwinds that, combined, led to a 22% plunge in earnings over the holiday period where double-digit sales growth in December was unable to overcome lower-than-expected demand in the autumn, according to The Wall Street Journal.
During a talk at the UBS Global Consumer and Retail Conference on Thursday, DiSilvestro said he anticipated that net sales will be comparable to the prior year, led by strong growth in the doll and vehicle sectors at the point-of-sale level. Overall, Mattel’s gross margins are expected to increase to 47% by the end of the year, compared to 45.9% the previous year.
He remained confident that toys in general will continue to be a strong sector due to their fundamentals. “We really believe this is a growth industry. Toys are important for development in play patterns for children, and parents will always prioritize spending for their children,” he said.
Through June he is anticipating lean times for Mattel, with first half sales and earnings anticipated to shrink by 25-30% at least partially due to anticipated retail inventory reductions during this time.
This is connected to the quarterly performance in 2022, which he said was significantly impacted by the timing and volatility of movements in Mattel’s retailer inventories, not by underlying customer demand, which he said has been solid and growing. He noted that, in the fourth quarter of last year, gross billings were down 19%, but point of sales transactions were up “mid-single digits.” He believes this points to strong fundamentals that the company can rely upon in the future.
“The fundamentals of our business are strong. Quarter to date, we have achieved growth in consumer takeaway measured by POS and for the full 2023, despite continued macro challenges, we expect to outpace the industry and gain market share,” he said.
This is part of why DiSilvestro said the company would be well-positioned for the latter half of the year. Inventory reductions are expected to peter out in the second quarter, followed by inventory growth in the third and fourth quarter as retailers prepare once more to stock up.
The company’s anticipated growth in doll sales is driven at least partially by the return of Disney Princess merchandising to Mattel, as well as the global rollout of Monster High, a theatrical tie-in with a new Trolls movie, and a new live- action Barbie movie coming out in July, “Barbie.” This movie in particular is expected to create renewed interest in the brand from both collectors and casual fans alike due to the positive buzz it has already received.
Meanwhile, Hot Wheels is also expected to deliver strong growth, especially with regard to moving into the radio controlled car market as well as fingerboards. He also noted that the company has recently wrapped up successful tie-ins with the Jurassic World franchise as well as Buzz Lightyear.