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Mattel Inc MAT

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Despite Coronavirus Headwinds, Mattel Continues on Its Lengthy Turnaround; Shares Undervalued

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

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.

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Company Profile

Business Description

Mattel markets toy products that are sold to its wholesale customers and direct to retail consumers. The company offers products for children and families, including toys for infants and preschoolers, girls and boys, youth electronics, handheld and other games, puzzles, educational toys, media-driven products, plush and fashion-related toys. Mattel's owned portfolio includes Barbie, Hot Wheels, Fisher-Price, Thomas & Friends, and American Girl, among other brands. In addition, it currently manufactures toy products for its segments both internally and through outside manufacturers.

Contact
333 Continental Boulevard
El Segundo, CA, 90245-5012
T +1 310 252-2000
Sector Consumer Cyclical
Industry Leisure
Most Recent Earnings Mar 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type Distressed
Employees 24,000

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