MAT Q3 Deep Dive: Retailer Order Timing and Tariffs Pressure Margins, Product Roadmap Expands

Toy manufacturing and entertainment company (NASDAQ:MAT) fell short of the market’s revenue expectations in Q3 CY2025, with sales falling 5.9% year on year to $1.74 billion. Its non-GAAP profit of $0.89 per share was 15.9% below analysts’ consensus estimates.

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StockStory’s Take

Mattel’s third quarter results were met with a negative market reaction, as the company missed Wall Street’s expectations for both revenue and adjusted earnings. Management pointed to ongoing shifts in retailer order patterns in the U.S., which contributed to a decline in reported sales and lower operating margins. CEO Ynon Kreiz acknowledged, “Our U.S. business was again challenged by industry-wide shifts in retailer ordering patterns.” Despite these headwinds, consumer demand for Mattel products increased in every region, with point-of-sale (POS) growth reported even in the U.S. Management also highlighted continued progress in international markets and resilience in key categories such as vehicles and challenger brands.

Looking ahead, Mattel’s guidance is anchored by expectations of robust holiday demand and a rebound in retailer orders as the environment normalizes. The company anticipates strong fourth-quarter top-line growth, supported by new product launches and ongoing expansion in digital gaming and entertainment partnerships. CFO Paul Ruh stated, “Orders from retailers in the U.S. have accelerated significantly, and POS for Mattel continues to grow in the U.S. and internationally.” Management is also closely monitoring tariff impacts and inflation, with plans to offset pressure through cost savings and operational efficiencies. Strategic partnerships and licensed content are expected to further strengthen the brand portfolio in the coming year.

Key Insights from Management’s Remarks

Management attributed third quarter results to a combination of retailer order timing shifts, international growth, and continued innovation in core and challenger product categories.

• Retailer ordering shifts: U.S. retailers continued transitioning from direct import to domestic shipping, impacting the timing of shipments and leading to a decline in reported North American sales. This shift provided retailers with more flexibility but temporarily suppressed Mattel’s top-line.
• International demand strength: International regions saw growth, with EMEA achieving a fourth consecutive quarter of gains and Asia Pacific expanding in key markets like China and Australia. This helped offset some of the weakness in the U.S. market.
• Category performance divergence: Vehicles, led by Hot Wheels, posted growth and are on track for an eighth consecutive year of gains, while dolls and infant, toddler, and preschool (ITPS) categories declined. Challenger categories such as action figures and games (like UNO) continued to perform well.
• Tariff and inflation pressures: Adjusted gross margin compressed due to unfavorable foreign exchange, higher tariffs, and inflation, only partially offset by cost savings initiatives. Management noted that the full effect of tariffs would be more visible in subsequent quarters as costs flow through inventory.
• Strategic partnerships and content: Mattel announced new licensing deals, including K-Pop Demon Hunters with Netflix and a renewal of its Disney Princess and Frozen agreements. The company also made progress in digital gaming and live-action television, aiming to diversify and expand its entertainment footprint.

Drivers of Future Performance

Mattel expects its performance in the coming quarters to hinge on holiday retail execution, product innovation, and managing cost pressures from tariffs and inflation.

• Holiday season execution: Management believes strong holiday demand and accelerated retailer restocking will drive a rebound in U.S. shipments. The ability to manage inventory and align with retail partners will be critical to meeting full-year guidance.
• Product and content pipeline: The launch of new lines such as Mattel Brick Shop and Hot Wheels Speed Snap, as well as upcoming entertainment releases and digital games, are seen as key growth levers. Management anticipates that these initiatives will help reinvigorate core brands, especially Barbie, and sustain momentum in vehicles and challenger categories.
• Cost and margin management: Tariff-related expenses and inflation remain headwinds. Management is pursuing operational efficiencies and cost savings programs to protect margins, but also cautioned that further price increases would depend on consumer response during the holiday season and broader macroeconomic developments.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the normalization of retailer ordering patterns and their impact on U.S. sales recovery, (2) the rollout and consumer reception of new products and entertainment tie-ins, and (3) management’s ability to offset tariff and inflation pressures through cost controls. Progress in digital gaming and execution on recently announced licensing partnerships will also be important markers for Mattel’s longer-term growth.

Mattel currently trades at $17.75, down from $18.85 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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