Toymaker Mattel, Inc. MAT reported better-than-expected second-quarter results, with adjusted earnings per share of $0.10, beating estimates, despite a 12% decline in net sales to $1.09 billion year-over-year. The company’s 2023 guidance of $1.10-$1.20 per share aligns with market expectations.
The Mattel Analyst: DA Davidson analyst Linda Bolton Weiser maintained a Buy rating on Mattel shares and nudged up the price target from $23 to $25.
The Mattel Thesis: The second-quarter beat and guidance reaffirmation came despite a worsening consumer demand environment, Weiser said in a note. She noted that the company said parents pulled back on toy purchases to save resources for holiday spending.
On a positive note, the analyst noted that Mattel ended the quarter with a double-digit decline in retail inventory reduction in dollar terms and a high-single-digit decline in weeks of supply.
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Mattel's point of sale was down in high-single-digits in the second quarter, but not worse than the industry's performance, she said. Gross margin remained flat year-over-year and exceeded expectations, she added.
Weiser, however, sees inflection at the start of the third quarter. Month-to-date in July Barbie POS, as well as Mattel's overall POS were up year-over-year, she said.
“Barbie toys related to the movie are flying off retail shelves and selling out,” she added.
”The vast majority of retailer inventory reductions are behind them, and MAT’s POS growth is positive Y/Y thus far in 3Q23, after the high-single-digit decline in 2Q23,” Weiser said.
The analyst raised the sales estimates, citing a positive forex effect, and maintained the earnings per share estimate for 2023. The price target hike, according to the analyst, was due to higher visibility on the return to constant currency sales growth in the third quarter.
Mattel Price Action: Following the release of the second-quarter report, Mattel fell 1.83% to $20.93 in after-hours trading, according to Benzinga Pro data.
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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