Mattel’s U.S. business was challenged in the third quarter by a shift in ordering patterns made by retailers in response to the macroeconomic environment and tariffs, but orders from retailers picked up at the start of the fourth quarter, Kreiz said.
Point of sale (POS), or consumer demand, has been growing too, Kreiz said.
“Looking into the balance of the year, we expect a good holiday season for Mattel, strong top-line growth in the fourth quarter, and are reiterating our full-year guidance,” Kreiz said.
The shift in retailers’ ordering patterns has to do with when orders are placed and who handles the importation and warehousing of the products, Mattel Chief Financial Officer Paul Ruh said during the call. The shift moved many orders from the third quarter to the fourth.
Previously, retailers used a direct import model in which they took ownership of the product in the sourcing country and handled the importation and warehousing themselves, Ruh said. By using their own logistics network, they would gain a greater margin.
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For Mattel, that meant the orders were placed a couple of months in advance and in larger quantities, Ruh said.
More recently, retailers shifted to a domestic shipping model in which they take ownership in the destination country after Mattel has handled the importation and warehousing, Ruh said. In this model, the orders are placed later and more frequently, on a just-in-time basis.
Retailers shifted to this model to give themselves more time and flexibility to respond to the macro environment and trade dynamics, Ruh said.
“Given our scale and supply chain capabilities, at the high level, the economics are to us similar for both direct import and domestic, which is actually different for other players in the industry, who are more geared to direct import,” Ruh said during the call.
Now, having gauged consumer demand, retailers are accelerating their domestic orders.
“They see what we are seeing; they see an increase in POS,” Ruh said. “So, they want to be ready for the season and they’re stocking up their inventories to meet the expected consumer demand.”
Rival toys and games company Hasbro is set to deliver its third quarter results Thursday (Oct. 23).
Mattel also continued its efforts to grow its intellectual property-driven toy business and expand its entertainment offering during the third quarter, Kreiz said during the earnings call.
According to a presentation released Tuesday, the company plans to launch its first two self-published digital games next year, is developing two new live-action television series, and is co-developing a live-action movie.
Mattel’s strategic collaboration with OpenAI, which involves embedding artificial intelligence capabilities in the toy company’s products, is “taking shape,” the presentation said.
