Mattel Inc MAT

Narrow-moat Mattel continues to benefit from both pandemic-related demand and past efforts to rectify the organizational structure. Thanks to more homebound kids, Mattel grew fourth-quarter sales by 10%, to $1.6 billion. Worldwide sales of dolls rose 13%, vehicles were up 11%, and the long struggling infant, toddler, and preschool segment ticked up 6%. And global strength was pervasive (except for Latin America), with North America sales rising 13%, EMEA up 14%, and Asia Pacific 12% higher. These top line gains helped accrue cost benefits, with the adjusted gross margin expanding 250 basis points (to 51.4%) and selling and administrative, or S&A, costs contracting more than 400 basis points (to 21.7%), leading to an adjusted operating margin of 12.6% (the best fourth-quarter metric since 2016). However, guidance implies slowing sales in 2021, with just a mid-single-digit sales growth rate projected, modestly ahead of the 3% we model, which could cede some cost leverage.