Barbie maker Mattel plunges as cautious shoppers, lack of digital games weigh on forecast

By Neil J Kanatt

Feb 10 (Reuters) – Mattel shares slumped nearly 30% in extended trading after the Barbie maker’s full-year profit forecast disappointed investors, underscoring how a recovery in toy demand remains elusive as cautious consumers rein in discretionary spending.

The company also missed fourth-quarter profit estimates on Tuesday by a wide margin. CEO Ynon Kreiz told Reuters that heavy promotional activity in December pressured margins, with sales in its U.S. business during the month growing “less than expected.”

Traditional toymakers’ margins have also come under pressure from import tariffs and rising production costs, and Mattel said it faced fluctuating retailer ordering patterns for much of last year due to trade uncertainties. As well, Mattel said it expects Barbie doll sales to return to growth only in 2027.

The Uno maker’s cautious tone echoed that of rival Hasbro, which projected muted annual revenue growth earlier in the day.

But Hasbro, which has a much stronger digital gaming presence, reported that quarterly revenue from its digital game, “Magic: The Gathering”, more than doubled from a year earlier, helping push shares up 7.5%.

Mattel has been far slower than its rival in building out a meaningful digital business. On Tuesday, the company said it would acquire for $159 million the remaining 50% of Mattel163 – a joint venture with China’s NetEase – signaling a push into self-published digital gaming, but these initiatives are still in early stages.

Mattel’s shares have risen 6% so far this year, compared with a 27% jump in Hasbro stock. Tuesday’s after-market share drop sets Mattel up for its worst intraday percentage fall in nearly six years.

“Mattel went into the holidays expecting a late sales surge that never materialized, leaving the company to lean heavily on promotions just to keep product moving – and that came at the expense of margins,” said eMarketer analyst Zak Stambor. 

“The results highlight how volatile demand and last-minute retailer ordering forced brands into deeper discounts.”

The company’s gross margin dropped nearly 5 percentage points to 45.9% in the December quarter.

WILL DIGITAL INVESTMENTS PAY OFF?

There were, however, pockets of strength for Mattel. Toy cars remained a standout, with Hot Wheels posting double-digit growth and solid performances from Matchbox and Disney and Pixar’s Cars lines during the December quarter.

Mattel is also pushing to expand its consumer footprint and build an entertainment portfolio around its brands. It hopes to repeat the success of the 2023 blockbuster “Barbie” with a live-action “Masters of the Universe” film in June and the Matchbox movie on Apple TV in October.

The company aims to undertake investments of about $110 million in 2026, primarily directed towards digital games, among other spends to boost its businesses.

“The big question now is whether Mattel’s increased investments can reignite demand, or simply extend the pressure in a highly value-conscious U.S. market,” Stambor said.

Mattel expects 2026 adjusted earnings per share of $1.18 to $1.30, below analysts’ average estimate of $1.75, according to data compiled by LSEG. Supported by about $150 million in revenue from the Mattel163 acquisition, Mattel forecast that sales this year would rise 3% to 6%. 

Adjusted earnings of 39 cents per share in the fourth quarter fell short of the 54 cents estimate, while net sales of $1.77 billion also missed expectations of $1.84 billion. 

The company also unveiled a $1.5 billion share buyback plan to be completed by 2028 and announced a multi-year licensing deal with Paramount Skydance to develop and market Teenage Mutant Ninja Turtles products starting in 2027.

(Reporting by Neil J Kanatt in Bengaluru; Editing by Sriraj Kalluvila, Sayantani Ghosh and Subhranshu Sahu)