MAT Q2 Deep Dive: International Growth and Margin Initiatives Amid U.S. Market Pressures

Toy manufacturing and entertainment company (NASDAQ:MAT) fell short of the market’s revenue expectations in Q2 CY2025, with sales falling 5.7% year on year to $1.02 billion. Its non-GAAP profit of $0.19 per share was 21.1% above analysts’ consensus estimates.

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StockStory’s Take

Mattel’s second quarter results were met with a negative market reaction, as revenue came in below Wall Street expectations despite better-than-expected non-GAAP profitability. Management attributed the shortfall primarily to U.S. retail order changes and global trade-related uncertainties, which led to delays in sales recognition and softer domestic performance. CEO Ynon Kreiz pointed to strong international growth and robust demand for brands like Hot Wheels and UNO, but emphasized that U.S. results were impacted by “timing shifts in retailer ordering patterns.” While adjusted gross margin improved, the company acknowledged that ongoing trade volatility and fewer new Barbie launches pressured top-line growth.

Looking forward, Mattel’s updated guidance reflects both optimism around international momentum and caution regarding U.S. trade dynamics and consumer demand. Management expects sales improvement in the second half of the year, driven by new product launches, supply chain adjustments, and continued cost-saving measures. CFO Paul Ruh highlighted the company’s actions to offset tariff impacts, stating, “We have implemented a variety of actions that will help us withstand some of those headwinds,” including pricing adjustments and supply chain diversification. Still, the outlook remains sensitive to changes in retailer order patterns and macroeconomic conditions, particularly in the U.S.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to strong international demand, growth in specific categories, and disciplined cost management, but noted U.S. headwinds from retail order shifts and trade uncertainty.

• International sales growth: Mattel achieved 9% growth across its international regions, with EMEA, Latin America, and Asia Pacific all posting gains. This helped offset declines in North America, where retailer order patterns and tariff-related uncertainties disrupted sales timing.
• Hot Wheels and Action Figures momentum: Vehicles, led by Hot Wheels, delivered double-digit growth, marking the brand’s eighth consecutive year of expansion. Action Figures also performed well, supported by new releases tied to major entertainment properties like Jurassic and Minecraft.
• Barbie and Dolls category pressure: The Dolls segment, particularly Barbie, saw declines due to fewer new launches and reduced promotional support from retailers. Management indicated that Barbie remains a strong global franchise, with plans for new innovation and partnerships later in the year.
• Cost savings and margin expansion: The company’s “optimizing for profitable growth” program delivered $23 million in savings during the quarter, contributing to a 200 basis point increase in adjusted gross margin, despite headwinds from inflation and tariffs.
• Trade and supply chain dynamics: U.S. performance was heavily affected by shifts from direct import to domestic shipping, which delayed sales recognition. Management said most delayed sales should be captured in the balance of the year, but acknowledged some could push into the next quarter or year.

Drivers of Future Performance

Mattel’s outlook is shaped by ongoing trade pressures, new product launches, and a continued focus on operational efficiencies.

• Tariffs and supply chain adjustments: Management expects the impact of tariffs, estimated at under $100 million for the year, to peak in the second half. The company is responding by diversifying its supply chain, optimizing product sourcing, and limiting price increases to maintain competitiveness.
• Innovation and entertainment pipeline: New product introductions, partnerships, and an expanded entertainment slate—including upcoming films and digital games—are expected to support sales growth in late 2025 and beyond. Management highlighted major projects like the Hot Wheels and Barbie movies, as well as strategic collaborations with OpenAI.
• Consumer demand and retailer behavior: The company cautioned that uncertainty remains around U.S. consumer demand and retailer order patterns, particularly for the holiday season. Promotional activity and inventory management will be closely monitored as Mattel seeks to balance growth and profitability.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) the pace of recovery in U.S. retail orders and channel inventory normalization, (2) the rollout and consumer reception of new Barbie, Hot Wheels, and Fisher-Price products, and (3) the company’s ability to manage tariff headwinds through cost savings and supply chain actions. Progress in Mattel’s entertainment initiatives, including film and digital game development, will also be key indicators of future growth potential.

Mattel currently trades at $17.19, down from $20.20 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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