Mattel Q2 Earnings Call Highlights

Key Points

• Mattel’s Q2 sales rose 10% year over year, led by vehicles, games, action figures and digital gaming. Hot Wheels gained 12%, while dolls and infant, toddler and preschool products declined.
• Profitability weakened as tariffs, inflation, royalties, advertising and strategic investments pressured results: adjusted operating income fell to $39 million from $96 million, and adjusted EPS dropped to $0.01 from $0.21.
• Mattel reaffirmed its 2026 outlook, including 3%–6% constant-currency sales growth and adjusted EPS of $1.27–$1.39. The company expects Barbie to improve in the second half and return to growth in 2027, supported by new entertainment, digital gaming and franchise initiatives.

Mattel NASDAQ: MAT reported second-quarter 2026 net sales growth of 10% on a reported basis and 9% in constant currency, supported by double-digit growth in North America, vehicles, games, action figures and digital gaming. The company reiterated its full-year outlook, while noting that higher advertising, strategic investments, tariffs and other costs reduced quarterly profitability.

Chairman and Chief Executive Officer Ynon Kreiz said the company continued to execute its strategy to expand its intellectual-property-driven play and family entertainment business across toys, digital games and film. He said sales growth had continued into the third quarter and that point-of-sale trends remained positive year to date.

Sales Growth Led by Vehicles, Games and Action Figures

Gross billings rose 12% in North America, 7% in EMEA and 4% in Asia Pacific, while Latin America was comparable with the prior-year period. Chief Financial Officer Paul Ruh said the U.S. shift in retailer ordering patterns, which had affected gross billings for four consecutive quarters, had “largely stabilized.” Retailer inventories declined by a low double-digit percentage from a year earlier.

Hot Wheels gross billings increased 12%, driven by children and adult collectors. Kreiz said Mattel was the global leader in dolls, vehicles and infant, toddler and preschool categories and gained share in vehicles and action figures, citing Circana data.

Challenger categories grew, led by games, including UNO and the contribution from Mattel163, as well as action figures tied to Toy Story 5 and Masters of the Universe. Mattel completed its acquisition of the remaining 50% interest in Mattel163 during the first quarter. Ruh said Mattel163 contributed nearly $49 million in revenue and about $14 million in adjusted operating income during the second quarter.

President, Chief Marketing and Brand Officer Roberto Stanichi said action figures also benefited from WWE and early shipments connected to Mattel’s DC partnership. He said Mattel was the No. 1 action-figure manufacturer in June, according to Circana.

Dolls declined, primarily reflecting lower Barbie streaming-content revenue and weakness in Polly Pocket. Growth in K-pop Demon Hunters and Disney Princess and Frozen partly offset those declines. The infant, toddler and preschool segment also declined, largely due to Fisher-Price, although Little People posted high-double-digit growth supported by partnerships including Nintendo.

Barbie Recovery Plan and Entertainment Initiatives

Mattel expects Barbie trends to improve during the second half of 2026 and forecasts that the brand will return to growth in 2027. Stanichi said the company plans to increase Barbie content, including a new Barbie Nutcracker animated special for the holiday season, the rerelease of seven classic animated specials on YouTube, a new Barbie Dreamhouse and updated product packaging.

For 2027, Mattel plans another animated special, the rerelease of six additional classic Barbie animated movies, enhanced fashion and accessory offerings, and additional adult-fan partnerships and collections, Stanichi said.

Mattel also highlighted progress in digital gaming. It launched its first self-published mobile game based on Masters of the Universe and has placed UNO Wild into soft launch. Kreiz said UNO Wild has met its production milestones and is expected to receive a global commercial launch in early 2027. Ruh said Mattel intends to deploy most of its planned $40 million in digital performance-marketing investment when UNO Wild launches commercially next year, rather than during 2026.

On the film side, Kreiz said Masters of the Universe recently became available on Amazon Prime Video after its theatrical release. He said it ranked as Prime Video’s No. 1 film globally in its first week and the most-watched movie across U.S. streaming platforms. Gross billings for the Masters of the Universe franchise have more than tripled year to date, according to the company. Mattel’s next film, Matchbox, is scheduled to debut Oct. 9 on Apple TV.

Margins Decline as Investment Spending Rises

Adjusted gross margin was 48.6% in the quarter. Ruh said the year-over-year decline reflected 170 basis points of gross incremental tariff costs, 120 basis points of inflation, 110 basis points from higher royalties and 60 basis points of unfavorable foreign exchange. Those impacts were partly offset by 120 basis points from Mattel163 and 80 basis points from other factors, including tariff-mitigation actions and cost savings.

Advertising expense increased $45 million to $124 million, including expenses tied to Mattel163, brand marketing, consumer engagement initiatives and theatrical releases. Adjusted selling, general and administrative expense rose $38 million to $384 million, primarily due to strategic investments and Mattel163-related costs.

• Adjusted operating income fell to $39 million from $96 million a year earlier.
• Adjusted EBITDA declined to $95 million from $117 million.
• Adjusted earnings per share was $0.01, compared with $0.21 in the prior-year period.
• Trailing 12-month free cash flow was $435 million, down from $530 million.

Mattel repurchased $100 million of stock in the quarter, bringing year-to-date repurchases to $300 million. Ruh said the company remains on track to repurchase $400 million in shares for the full year. Since resuming repurchases in 2023, Mattel has bought back $1.5 billion of shares, reducing shares outstanding by approximately 23%.

Full-Year Outlook Reaffirmed

Mattel reiterated its 2026 guidance for constant-currency net sales growth of 3% to 6%, adjusted gross margin of about 50%, adjusted operating income of $580 million to $630 million, and adjusted earnings per share of $1.27 to $1.39.

The company expects strong growth in vehicles and challenger categories combined, comparable performance in dolls and a decline in infant, toddler and preschool. Ruh said gross margin should improve in the second half, aided by Mattel163, cost savings and an expectation that the heavy promotional activity seen late in 2025 will not recur.

Mattel’s outlook does not include a material benefit from possible tariff refunds. Ruh said the company is working through the refund process but that the timing and amount remain uncertain.

Looking ahead to 2027, Kreiz said the company expects mid- to high-single-digit top-line growth and strong double-digit bottom-line growth, citing anticipated Barbie growth, continued vehicle momentum, expanded partner-IP offerings, digital games and a full year of initiatives including DC, Teenage Mutant Ninja Turtles and Frozen 3.

About Mattel (NASDAQ:MAT)

Mattel, Inc is a leading global toy company headquartered in El Segundo, California. Founded in 1945 by Harold “Matt” Matson and Elliot and Ruth Handler, the company has grown into a major player in the toy and family products industry. Mattel designs, manufactures, and markets a broad range of toys, games and entertainment products under well-known brands, including Barbie, Hot Wheels, Fisher-Price, American Girl, Thomas & Friends, UNO and Matchbox. In addition to its proprietary labels, Mattel holds licenses with global entertainment franchises, partnering with Disney, Warner Bros., WWE and other studios to create character-driven play experiences.

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