Proactive Investors - While Mattel, Inc (NASDAQ:MAT) reported an impressive 24% year-over-year increase in doll sales for the third quarter driven by the success of the Barbie movie, concerns about a slowdown in the toy industry heading into the holiday season weighed on the stock on Thursday.
Mattel topped 3Q sales and profit forecasts and raised its full-year profit guidance but left its revenue projection unchanged, still expecting its sales to be comparable to the previous year’s $5.44 billion.
Mattel's chief financial officer Anthony DiSilvestro told investors on the company’s earnings call that its guidance reflects higher-than-anticipated benefits associated with the Barbie movie offset by the impact of overall toy industry declines.
He highlighted that the toymaker was operating in a challenging macroeconomic environment with higher volatility that may impact consumer demand.
“The guidance considers what the company is aware of today but remains subject to further market volatility, unexpected disruptions and other macroeconomic risks and uncertainties,” he said.
He also noted that the majority of the “Barbie benefit,” being an estimated $125 million plus in sales with an operating income margin exceeding 60%, was reflected in the company’s 3Q results.
This wasn’t the news investors were hoping to hear heading into the fourth quarter, traditionally a key selling period for toy companies.
Rival Hasbro (NASDAQ:HAS)'s 3Q results reported on Thursday added to investors’ concerns around waning demand for toys.
The Rhode Island-based company posted revenue of $1.5 billion lagging estimates of $1.64 billion and representing a 10% year-over-year decline.
It also slashed its full-year guidance on a “softer toy outlook,” projecting a 13% to 15% drop in revenue compared to its previous forecast of a 3% to 6% decline.
As such, Mattel’s shares were 8.2% lower at US$18.47 at noon on Thursday. Hasbro (NASDAQ:HAS)’s shares also tumbled 9.9% to US$49.34.
Amid economic uncertainty and as inflationary pressures drag on consumer spending, toymakers are increasingly diversifying their offerings.
On the blockbuster success of the Barbie movie, Mattel earlier outlined plans to create an entire cinematic universe related to its toy products. 14 films are in the works, including films based on American Girl dolls, Thomas the Tank Engine and the card game Uno.
Toronto-based Spin Master, which is due to report its third quarter earnings on November 2, like Mattel is increasingly reliant on its digital and entertainment offerings to offset weakness in toy sales.
The company, whose brands include Paw Patrol, Bakugan and Rubik’s Cube, recently announced it has partnered with Nickelodeon Movies and Paramount Pictures for a third feature film for its Paw Patrol franchise.
Its shares also fell on negative sentiment towards the broader toy sector Thursday, down 5% to about C$35.