Mattel forecasts 2023 profit below estimates as inflation hits demand By Reuters

By Granth Vanaik and Uday Sampath Kumar

(Reuters) -Mattel Inc forecast 2023 earnings below estimates on Wednesday, joining rival Hasbro Inc (NASDAQ:) in feeling the brunt of persistently high inflation that has hit demand for its action figures and Barbie dolls.

Shares of the company were down about 10% in extended trading.

While the toy industry has historically been more resilient to economic downturns than other discretionary sectors, Mattel (NASDAQ:) said demand dropped off suddenly and sharply in October and November, leading to more profit-margin denting clearance sales to get rid of excess inventory.

“As we enter 2023 we expect it to be a challenging environment for consumers, not just in toys, but in general, so there could be volatility,” Mattel Chief Executive Officer Ynon Kreiz told Reuters.

However, Kreiz added he still expected the industry to grow this year.

Monopoly maker Hasbro also projected its holiday-quarter results below Wall Street expectations in January, and said it would cut 15% of its global workforce this year to return its business to a “competitive” position.

Kreiz said Mattel was taking “similar measures” to save an additional $50 million in costs this year, on top of its prior target of about $250 million.

Mattel projected adjusted profit between $1.10 and $1.20 per share for the full year, below analysts’ expectations of $1.66, according to Refinitiv data.

The company’s gross margin fell 630 basis points to 43% in the fourth quarter ended Dec. 31. Excluding one-time items, Mattel earned 18 cents per share, below estimates of 29 cents.

Overall gross billings for Barbie, Mattel’s biggest brand, fell 33% in the quarter, while those of Hot Wheels rose 8%.

Total net sales fell 22% to $1.40 billion, missing estimates of about $1.68 billion.

Mattel said it expects to resume share repurchases in 2023, with about $200 million remaining under the company’s current program.