Shares of Mattel (NASDAQ:) rose 5.1% after upbeat comments from company executives on Morgan Stanley (NYSE: ) conference.
Executives noted a “strong” Black Friday performance that boosted investor confidence. By comparison, Hasbro (NASDAQ: ), a peer company that also spoke on the conference call during the premarket session, saw its shares rise 2.2%.
Mattel expressed confidence in its growth outlook for the fourth quarter and reaffirmed its commitment to meeting its full-year guidance. The company has seen momentum in its key brands, with Hot Wheels on track to record record sales for the seventh year in a row.
Despite this positive trend, Mattel still predicts a decline in the toy industry in 2024, albeit less than expected at the beginning of the year.
Looking ahead to 2025, Mattel is optimistic about its film slate, describing it as “very strong.” The company also expects further improvement in the gross margin line, suggesting that a combination of gross margin control and administrative expense management is likely to drive further growth in operating margins in 2025.
In order to maintain its gross margin, Mattel plans to adjust prices as necessary to counter the impact of the tariffs. The company is also looking to reduce its reliance on China for product procurement, which is currently below 40%, as opposed to the industry average of 80% to 85%.
By 2027, Mattel’s strategy is for no single country to account for more than 25% of its sourcing. Currently, less than 10% of Mattel’s products are sourced from Mexico, and the company does not source from Canada.
In terms of capital allocation, Mattel’s priorities include investing to drive organic growth, maintaining an investment-grade rating with a target leverage ratio of 2x to 2.5x, exploring strategic mergers and acquisitions that fit the company’s growth profile, and executing share buybacks.
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