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Mattel (MAT) Stock Gains on Q4 Earnings and Sales Beat

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Mattel, Inc. (MAT - Free Report) reported fourth-quarter 2020 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Notably, both the metrics beat the consensus mark for the third consecutive quarter. Following the robust results, the company’s shares gained 2.1% in after-hour trading session on Feb 9.

Despite the coronavirus pandemic, both the top and bottom lines improved year over year courtesy of robust e-commerce growth, highly efficient supply chain and strong demand for its products. Moreover, increase in worldwide gross sales for Dolls, Barbie and Hot Wheels drove the company’s results in the quarter.

The company reported adjusted earnings per share of 40 cents, comfortably beating the Zacks Consensus Estimate of 24 cents. In the prior-year quarter, the company reported adjusted earnings per share of 11 cents.

Ynon Kreiz, Mattel chairman and CEO said, “This was a banner quarter for the company with our best performance in years. In the midst of a pandemic and very challenging market conditions, our results exceeded expectations, with another major upswing in topline and a significant increase in profitability, as we gained global market share and continued to transform Mattel into an IP-driven, high performing toy company.”

Mattel, Inc. Price, Consensus and EPS Surprise Mattel, Inc. Price, Consensus and EPS Surprise

Mattel, Inc. price-consensus-eps-surprise-chart | Mattel, Inc. Quote

Sales Discussion

Net sales of $1,625.8 million surpassed the Zacks Consensus Estimate of $1,582 million. Moreover, the top line improved 10% year over year. On a constant-currency basis, sales also increased 10% from the prior-year quarter.

In North America, gross billings were up 13%, both on a reported and constant-currency basis. This can primarily be attributed to increase in sales in Dolls (including Barbie), Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends), Action Figures, Building Sets, Games, and Other. The improvement was marginally negated by decline in lower billings of licensed action figures), and Vehicles (including Hot Wheels).

In the International region, gross billings rose 8% (as reported), owing to Vehicles (including Hot Wheels), Dolls (including Barbie, partially overshadowed by lower billings of licensed dolls), Action Figures, Building Sets, Games, and Other (including Games like UNO and MEGA). The gain was offset by dismal Infant, Toddler, and Preschool (including Fisher-Price Friends) sales.

Brand-Wise Worldwide Sales

Mattel, through its subsidiaries, sells a broad range of toys. These items are grouped under different brands — Barbie, Hot Wheels, Fisher-Price and Thomas & Friends and Other.

As reported, worldwide gross sales at Mattel Power Brands were up 10% to $1,834.9 million year over year. The metric also rose 10% on a constant-currency basis. Moreover, the Barbie brand witnessed an improvement of 19% on reported basis and 18% on constant-currency basis. Gross sales at the Hot Wheels brand climbed 13% on a reported basis and 14% on constant-currency basis. Moreover, gross sales were up 9% on reported basis and 10% on constant-currency basis at the Fisher-Price and Thomas & Friends brands. Gross sales at Other increased 4% on both reported and constant-currency basis.

Operating Results

Adjusted gross margin expanded 250 basis points to 51.4%, driven by incremental realized savings from cost savings programs and decline in royalty expenses.

Adjusted other selling and administrative expenses declined 13% to $364.7 million. The improvement can primarily be attributed to benefits from Structural Simplification savings.

Balance Sheet

As of Dec 31, 2020, the company’s cash and equivalents were $762.2 million compared with $630 million as of Dec 31, 2019. Total inventories as of the end of the fourth quarter were up 3.9% year over year to $514.7 million.

The company’s long-term debt was $2,854.7 million as of Dec 31, 2020, higher than $2,846.8 million as of Dec 31, 2019. Shareholder’s equity was $596.3 million.

Mattel, which shares space with Hasbro (HAS - Free Report) , Electronic Arts (EA - Free Report) and Take-Two Interactive Software (TTWO - Free Report) , currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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