Barbie-maker Mattel (MAT) CEO Ynon Kreiz is advocating for “zero tariffs on toys” amid plans for increasing prices of its U.S. toys. Last week, President Donald Trump suggested that tariffs could lead to a toy shortage, leaving toy makers in a jiffy. Notably, Mattel reported better-than-expected results for its fiscal first quarter yesterday. However, the Hot Wheels maker paused its full year Fiscal 2025 guidance due to growing pressure from tariffs and difficulty in predicting consumer spending.
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Mattel’s Q1 sales of $826.6 million, rose 2% year-over-year and beat analysts’ forecast of $786 million. Similarly, adjusted loss per share of $0.03 improved from Q1FY24’s loss of $0.05 per share and the consensus loss of $0.10 per share. Commenting on the outlook, Kreiz said that Mattel is operating in an uncertain macroeconomic environment with significant volatility surrounding “global trade policy and U.S. tariffs.” He highlighted that Mattel is taking steps to “fully offset the potential incremental cost impact of tariffs on future performance.”
Mattel Strategically Moves Production Out of China
Nearly 50% of Mattel’s global sales come from the U.S., while it imports nearly 20% of the goods sold domestically from China. The escalating trade war is poised to make these goods significantly more expensive. In response, Mattel said that it would reduce imports from China to less than 15% by end of 2026, and further below 10% by the end of 2027. Moreover, Mattel plans to move production of roughly 500 toys from China this year, while it had already moved production of about 280 toys from the mainland last year.
Earlier in February, Mattel said that its diversified supply chain would facilitate easier relocation of production and that it would raise toy prices to offset any tariff-related impact. The company also imports a lot of toys from other tariff-laden countries like Indonesia, Malaysia, and Thailand. The Toy Association is advocating for zero tariffs on toys, and Mattel is in full support of this view.
Beginning in the July quarter, Mattel expects nearly $270 million in incremental costs from tariffs in 2025. However, Mattel said that its “mitigating actions” would potentially fully offset these costs. Additionally, Mattel plans to cut its promotion expenses from $80 million to $60 million this year to achieve targeted savings. Despite the tariff pressures, Kreiz believes that about 40% to 50% of its toys will remain priced at $20 or less.
Is Mattel a Good Stock to Buy?
Heading into the earnings print, analysts were highly bullish about Mattel’s long-term stock trajectory. On TipRanks, MAT stock has a Strong Buy consensus rating based on three Buys and one Hold rating. The average Mattel price target of $21.50 implies 32.7%% upside potential from current levels. Year-to-date, MAT stock has lost 8.6%.
Please note, this consensus rating was issued before Mattel’s earnings release and is subject to change once analysts review their stock recommendations based on the results.
