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Mattel CEO Ynon Kreiz joins Yahoo Finance to discuss how Mattel beat estimates despite supply chain disruptions, expectations for the holiday season, and the plans to meet consumer demand.
BRIAN SOZZI: Toymaker Mattel is gearing up for what could be another strong holiday shopping season. But first, there's third quarter earnings to get through. The company beat on sales and profits, as it saw strong demand for action figures and momentum for Barbie. This was the fifth consecutive quarter of year over year net sales growth for Mattel. Free cash flow for the trailing 12 months grew about 2 and 1/2 times to 320 million, not bad. And Mattel lifted its full year profit outlook, despite supply chain bottlenecks hammering the toy industry.
Joining us now is Mattel's chairman and CEO Ynon Kreiz. Ynon, always nice to see you. Thanks for taking some time here on a Friday morning. Look, since the last time we talked, all we heard, whether it's really in global business, is supply chain, supply chain, inflation. How did you deliver sales growth and profit growth in a quarter when there was so much bottlenecks out there?
YNON KREIZ: Yes, Brian, you've been following the story. And as you said, it was another strong quarter for Mattel with continued consumer demand for our products. Achieving growth and gaining market share for the fifth quarter in a row is a real testament to our strength and the progress we're seeing in the business. The-- we are on track now to achieve our highest full year growth rate in decades. And as you mentioned, we just raised our guidance for the third time this year.
This performance is comprehensive. We've obviously done a really good job in supply chain. We did anticipate short supply and longer lead times and factor that into our planning with very specific mitigating actions. And this is really where our scale expertise and flexible supply chain model work to our advantage. And we are ready for a strong holiday season.
BRIAN SOZZI: Do you still have-- I mean, the images of products and retail goods, consumer goods, sitting on ships, I mean, they're pretty jarring, Ynon. Do you still have large quantities of what you plan to sell for the holidays? Are they still out there on these ships?
YNON KREIZ: Look, we did see disruption, and it's not that we were not impacted. We were impacted, and we talked about it on our earnings call. But with that, we were still able to work through the disruption, put product on shelves, and see growth in all of our core categories in two of our challenging categories and in every one of our regions.
So the performance was comprehensive. It wasn't just one region or one category. It was pretty comprehensive and broad-based. With that, again, still, we had challenges, but the real story here is how we manage to work through this disruption through very successful execution.
BRIAN SOZZI: You know, I agree with a lot of the economists out there. I do think it's going to be a very strong holiday shopping season. Do you have enough product, Ynon, if consumers come out there and buy three Barbie dolls on Black Friday, and then they want to go back in early December and buy six more? I mean, do you have that type of inventory to meet that very strong demand?
YNON KREIZ: Yes, you know, we do what we're supposed to do. You know, we are prepared for the holiday. We see consumer demand still being strong. Retail orders are strong. We have our retail promotion plans in place and a lot of really good and exciting product that is ready for Christmas.
We have our inventory. Our factories are working. Our supply chain is performing. And we are ready for the Christmas and the holiday season. Now, we also said that we may not be able to fill all of the demand, but we are definitely working very closely with our retail partners in trying to do that.
BRIAN SOZZI: I'm going to reveal my inner kid here, Ynon. Action figure sales up 50% in the quarter, up 76% year to date. What in the world is driving those types of sales growth levels for action figures?
YNON KREIZ: Yeah, this was a very strong quarter for our action figure category, up, as you said, 50%, and, in fact, 76% year to date. The big drivers are Masters of the Universe, Jurassic World, WWE. And we just renewed our agreement, our long standing relationship with WWE, and added another important franchise to our portfolio to our expanded relationships with Disney, for the Pixar movie, "Lightyear."
This is the origin story of Buzz Lightyear, which will launch next year. It's expected to be very poetic. It's a great movie. The whole line is very playful. And we're very excited about that. So we're seeing continued strength for the action figures category and excited to see what's coming next.
BRIAN SOZZI: Where did you-- you know, just staying on the toy, really, my affinity for toys, where did you come up with that Fisher-Price phone that was really, I think, caught a lot of attention on social media this week?
YNON KREIZ: Yeah, this is really part of our innovation and how we continue to reimagine our product, even some of the classic toys. And this is about the 60th anniversary of the charter phone. What we released is a fully functioning model with Bluetooth technology, basically inviting adults to be kids again and play with what used to be their favorite toy, but leveraging modern technology. And again, it's a playful take on a classic product that represents a lot of history and heritage, but is still very relevant for people today.
BRIAN SOZZI: Yeah, no, I would use it even though it connects with my mobile phone, Ynon. Back to the boring stuff, lastly, last time we talked about three months ago, we talked a little bit about how much cash you're generating and whether you might come out with a dividend. You said you do have some optionality. Any update on that optionality?
YNON KREIZ: This was another strong quarter for us in terms of generating free cash flow. In the trailing 12 months, we achieved $320 million of free cash flow, which is almost 2 and 1/2 times the level we were just a year ago. We're seeing our leverage ratio continue to decline. You know, it's very consistent. It's now 2.8 relative to 5.3 times just a year ago.
So, again, a lot of strong improvement in that part of our business as well, and strengthening our balance sheet and making our way towards investment grade credit metrics. And with that, we will have more optionality with a stronger balance sheet and be able to continue to find ways to create shareholder value.
BRIAN SOZZI: All right, well, good to see the turnaround continue, even in this challenging environment. Mattel chairman and CEO Ynon Kreiz, have a great weekend, and good luck this holiday season.