Analyst Note| Jaime M. Katz, CFA |
Narrow-moat Mattel posted outstanding first-quarter results, even when accounting for the 14% sales decline in the year ago period. Total sales in the quarter handily outpaced our expectations (for 9% growth), rising 47% to $874 million—a first-quarter level last reached in 2016. Demand was widespread across the portfolio, with worldwide gross sales for Barbie rising 87%, Hot Wheels climbing 16%, and Fisher-Price & Thomas jumping 33%. Mattel also scored with its challenger categories (action figures, games, building sets), which saw gross sales up 69%. On the heels of this strength, expense leverage was healthy, driving a 3.2% adjusted operating margin; for reference, Mattel has failed to break even in any first quarter since 2014 as it is seasonally small.