Mattel (MAT) Q2 Earnings and Revenues Surpass Estimates
Mattel, Inc. MAT reported second-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. However, the top and bottom lines declined on a year-over-year basis. Following the results, MAT’s shares declined 1.5% in the after-hour trading session on Jul 26.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share of 10 cents, beating the Zacks Consensus Estimate of a loss of 4 cents. In the year-ago quarter, it reported adjusted earnings per share (EPS) of 18 cents.
Net sales during the quarter amounted to $1,087.2 million, outpacing the Zacks Consensus Estimate of $996 million. The top line decreased 12% year over year. On a constant-currency (cc) basis, sales declined 13% from the prior-year quarter’s figure. The dismal performance of the Barbie brand negatively impacted the company’s performance.
In the North America segment, gross billings fell 18% (as reported and at cc) year over year. Gross billings in the International segment dipped 1% (on a reported basis) and 3% (at cc) year over year. The segment was affected by dismal performance of Action Figures, Building Sets, Games and Other (primarily Action Figures), Infant, Toddler and Preschool (including Fisher-Price), and Vehicles (including Hot Wheels), marginally overshadowed by growth in Dolls. Our model predicted North America and International gross billings to tumble 23.5% and 17.6% year over year, respectively.
Net sales in the North America segment declined 18% year over year on a reported basis and at cc. The International segment’s net sales fell 3% (as reported) and 5% (at cc) year over year. Our model estimated North America and International revenues to decline 22.5% and 17.8% year over year, respectively.
Brand-Wise Worldwide Sales
Mattel, through its subsidiaries, sells a broad range of toys. These items are grouped under different brands — Barbie, Hot Wheels, Fisher-Price, Thomas & Friends, and Other.
Worldwide gross billings by Mattel Power Brands fell 11% (on a reported basis) and 12% (at cc) year over year to $1,227.5 million. The Barbie brand witnessed a decline of 6% (on a reported basis) and 7% (at cc) year over year.
Gross billings at the Hot Wheels brand rose 10% (on a reported basis) and 9% (at cc) year over year. Gross billings at Fisher-Price were down 28% (on a reported basis) and 29% (at cc) year over year. Gross billings at Other decreased 17% (on a reported basis) and 18% (at cc) year over year.
Operating Results
During the second quarter, the company’s adjusted gross margin came in at 44.9%, flat year over year. Gross margin benefited from Optimizing for Growth program, foreign exchange favorability as well as lower severance and restructuring expenses. However, inventory management efforts including higher close-out sales and inventory obsolescence expense, cost inflation and an unfavorable fixed cost absorption negatively impacted the margin.
During the quarter under discussion, adjusted other selling and administrative expenses declined $19 million year over year to $324 million. The downside was due to Optimizing for Growth program and cost management efforts.
Balance Sheet
As of Jun 30, 2023, cash and cash equivalents were $299.9 million compared with $274.5 million as of Jun 30, 2022. Total inventories at the end of the second quarter came in at $971.6 million compared with $1,177.6 million reported in the prior year quarter.
Long-term debt (as of Jun 30, 2023) was $2,327.8 million compared with $2,323.3 million as of Jun 30, 2022. Shareholders’ equity was $1,962.4 million.
Outlook
For 2023, management continues to anticipate flat net sales in comparison with 2022 at cc. Adjusted gross margin is expected to be 47% compared with 45.9% reported in the prior year. Adjusted EBITDA is projected in the range of $900-$950 million compared with $968 million reported in the prior year.
Capital expenditures are suggested in the range of $175-$200 million compared with $187 million reported in 2022. MAT anticipates 2023 adjusted EPS to be between $1.10 and $1.20, down from $1.25 reported in 2022. The Zacks Consensus Estimate for 2023 earnings is currently pegged at $1.16.
Zacks Rank & Key Picks
Mattel currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
Trip.com Group Limited TCOM flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 147.9%, on average. Shares of TCOM have increased 46.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS suggests rises of 101.6% and 531%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited OSW carries a Zacks Rank #2 (Buy). OSW has a trailing four-quarter earnings surprise of 65.8%, on average. Shares of OSW have soared 62.6% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates increases of 33.9% and 89.3%, respectively, from the year-ago period’s levels.
Royal Caribbean Cruises Ltd. RCL carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have surged 168% in the past year.
The Zacks Consensus Estimate for Royal Caribbean Cruises’ 2023 sales and EPS implies gains of 48.8% and 163.1%, respectively, from the year-ago period’s levels.
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