Toy Maker Mattel's Shares Are Diving Despite Barbie-Driven Q3 Beat: Here's Why

Mattel Inc MAT reported third-quarter FY23 sales growth of 9% year-on-year to $1.919 billion, beating the analyst consensus estimate of $1.835 billion.

North America segment sales increased 10% Y/Y, and International sales climbed 10% as reported, 3% in constant currency. Net Sales in the American Girl segment decreased 13%.

Worldwide Gross Billings for Dolls jumped 27% as reported, driven by growth in Barbie, Disney Princess and Disney Frozen, and Monster High.

Worldwide Gross Billings for Infant, Toddler, and Preschool fell 2%, Vehicles grew 18%, and Action Figures, Building Sets, Games, and Others dropped 19%, as reported.

Gross profit increased 15% Y/Y to $977.9 million, and the gross margin expanded 280 basis points Y/Y to 51%.

Operating margin expanded 240 basis points to 24.7%, and operating income for the quarter grew 21.1% to $473.9 million.

Adjusted EBITDA increased 22% to $579.7 million

Adjusted EPS of $1.08 beat the analyst consensus of $0.86.

Mattel held $455.7 million in cash and equivalents as of September 30, 2023.

Inventories at the end of the quarter amounted to $790.5 million versus $1.1 billion last year.

"Our results benefited from the success of the Barbie movie, which became a global cultural phenomenon, and marked a key milestone for Mattel," said Chairman and CEO Ynon Kreiz.

The company's CFO Anthony DiSilvestro remarked that the challenging macroeconomic background with higher volatility could impact consumer demand, according to a report from Reuters.

Outlook: Mattel continues to expect FY23 net sales to be comparable, on a constant currency basis, to FY22 sales of $5.44 billion.

Mattel raised FY23 adjusted EPS guidance to $1.15 - $1.25 (prior year $1.10 - $1.20) versus the consensus of $1.21.

MAT raised FY23 adjusted EBITDA to $925 million - $975 million (prior year $900 million - $950 million).

MAT continues to expect capital expenditures of $175 million - $200 million, free cash flow of more than $400 million.

Price Action: MAT shares are trading lower by 9.60% at $18.18 in premarket on the last check Thursday.