American toys giant Mattel (MAT) has expanded its northern Mexico plant to become its largest manufacturing hub as it works to bring production closer to its market to cut costs.
Mattel has long relied on Asian factories in China, Malaysia, and Vietnam to produce its toys, which is then transported to the U.S. for sale. However, now the modus operandi is changing as the company consolidates its manufacturing footprint.
The company spent about $50 million to expand its northern Mexico plant, which is located in the state of Nuevo Leon, after closing two factories in Asia and a plant in Canada. The expanded Mexican factory will now produce some of Mattel’s top-selling toy brands such as the Mega Bloks.
“Being able to have product close to your consumer and not having to transport it from Asia, that’s going to be more profitable and more competitive when you take costs into account,” Reuters quoted Gabriel Galvan, Mattel’s Latin America managing director, as saying.
Mattel’s Mexican mega-factory is close to the company’s second-largest U.S. distribution center located in Dallas–Fort Worth. “We can be there in 24 hours, so for us it’s really convenient,” Galvan said of the proximity of the hub to the distribution facility.
Mattel’s Mexican Mega-Factory and Dreamworks’ Trolls Toys Deal
Mattel is bringing manufacturing closer to the market with the goal of cutting logistics costs just as it prepares to introduce new products. The company recently struck a multiyear global licensing deal with a Comcast (CMCSA) unit to make toys inspired by DreamWorks Animation’s Trolls film. The toys stemming from that deal are expected to go on sale around the same time the film will debut in theaters in November 2023.
Wall Street’s Take
The Street is cautiously optimistic about Mattel stock with a Moderate Buy consensus rating. That’s based on eight Buys versus three Holds. The average Mattel price target of $31.95 implies 42.5% upside potential to current levels. Shares have increased 22% over the past six months.
Blogger Opinions
TipRanks data shows that financial blogger opinions are 88% Bullish on MAT, compared to a sector average of 70%.
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