Mattel's Q2 Earnings Out Today: Will 'Barbie' Magic Save The Day?

Toymaker Mattel, Inc. MAT is set to report its second-quarter results Wednesday after the market close. The stock has rallied strongly since late June, breaking out of a consolidation phase, thanks to the Barbie movie craze.

Key Numbers To Watch: The El Segundo, California-based company is expected to post a loss of $0.02 per share in the second quarter compared with a profit of $0.18 a year ago.

The June quarter revenue may have dropped 19% year-over-year to $1 billion.

In the first quarter that ended in March, Mattel posted better-than-expected revenue, but the bottom line came in below expectations. As economic headwinds persisted, the company faced rising costs and slowing demand for its toys. During downturns and economic uncertainty, consumers first cut back on spending on discretionary items such as toys.

Mattel stock did rally post-earnings as the company and rival toymaker Hasbro, Inc. HAS announced a multi-year licensing agreement. The agreement provided for the companies to launch co-branded toys and games using each other's popular brands.

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Barbie Boost This Time Around? The excitement is going to be around the impact of the “Barbie” movie, directed by Greta Gerwig, which had a theatrical release on July 21 alongside Christopher Nolan‘s “Oppenheimer.” Mattel owns the right to Barbie and co-produced the movie through its Mattel Films unit.

In a bid to capitalize on the Barbie mania, Mattel introduced new dolls and toys and entered into brand partnerships with many retailers.

The Barbie movie benefits Mattel in four ways, said DA Davidson analyst Linda Bolton Weiser in mid-July. It boosts related toy sales in the near term, enhances the pop culture relevance of the brand for the long term, increases brand-licensing revenue and potentially provides an earnings boost related to Mattel's portion of the movie economics, she said.

The analyst also sees the company benefiting from a decline in retail inventories.

The stock added about 1.8% in Monday's session as Warner Bros. Discovery, Inc.'s WBD Barbie collected $155 million in domestic box office in the first three days in theatres. This marked the highest opening in 2023.

Outlook: Weiser has a tempered outlook for the near term. “Against the Barbie movie back-drop, we have not been super-pounding the table on MAT here because the 2023 guidance already builds in a very robust sales recovery in 2H23, following the work-down in retail inventory levels that occurred in 1H23,” she said.

That said, the company has managed to improve financial performance significantly over the past three years, bringing down the financial leverage and resuming stock buybacks, the analyst said. All it has to do now is resume a cash dividend, she added.

The analyst also said the mix shift toward dolls, like Barbie, Monster High, and Disney Princess, should contribute to more margin expansion over the next few years.

DA Davidson has a Buy rating and $23 price target for Mattel but the firm hinted it will review the price target for the second-quarter results.

Price Action: In premarket trading on Wednesday, Mattel fell 1.75% to $20.80, according to Benzinga Pro data. The stock is up about 19% so far this year.

Related Link: If You Invested $1,000 In Mattel Stock When ‘Barbie Girl’ Song Was Released, Here’s How Much You’d Have Today

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