Mattel Inc MAT

While cost savings and innovation at narrow-moat Mattel have steadied the business over the past few years, pressure from COVID-19 has disrupted its momentum in 2020. Conservative management by retailers of inventory has led to a wide disparity between Mattel’s shipments and point-of-sale, or POS, figures, which generally tend to offer a more realistic picture of current demand. POS was up at a high-single-digit rate in the second quarter, against Mattel’s net sales decline of 15% (to $732 million). With just 4% of its retail outlets shuttered at quarter end (accounting for its 8% of sales base), versus 30% at the end of the first quarter, we anticipate sales improvement in second-half 2020, particularly if retailers remain open and ease inventory control. Mattel, though, failed to commit to sales growth during the second half of 2020, given the uncertainty surrounding COVID-19 and the potential for store reclosures. We forecast second half sales growth of roughly 1%, which we don’t plan to alter materially, as international store re-openings could provide support for toy sales.