By Gary Symons
TLL Editor in Chief
The toys and games sector is on fire this year, as Mattel reported this week its net sales in Q2 soared by an astonishing 40% over the same period last year.
The news followed equally stellar results from competitor Hasbro, which days ago reported its Q2 revenues jumped by 54% year-on-year.
Mattel Chair and CEO Ynon Kreiz says the company is in the best position it’s enjoyed for years, despite the challenges of the pandemic.
“This was another exceptional quarter for Mattel, with outstanding consumer demand for our product,” said Kreiz. “Our strength is foundational and broad-based. We believe we are in the strongest position we have been in many years to improve profitability and accelerate topline growth. This is an exciting time for Mattel.”
A quick look at the core numbers makes clear why the champagne corks are popping over at Mattel’s HQ.
The company logged net sales of $1.03 billion for the quarter, up 40% as reported and 36 % in constant currency. Reported gross margin came in at 47.5%, an improvement of 390 basis points. Mattel’s Adjusted EBITDA also saw a massive jump at $131 million, an increase of $102 million.
“Mattel continued its strong performance this quarter, with substantial gains in net sales, further expansion of gross margin, and more than quadrupling our Adjusted EBITDA,” said Mattel CFO Anthony DiSilvestro. ” We are meaningfully increasing our cash flow generation and free cash flow conversion as well as strengthening the balance sheet. We are pleased to raise guidance as we continue to improve profitability and accelerate topline growth.”
The question for long term investors and Mattel partners is why this powerful surge in growth has happened, and will it continue over the long term. Many analysts say the toy and game industry is in a strong position for growth due to the continuation of the pandemic, which has limited opportunities for children and adults alike to engage in social activities.
However, like Hasbro, Mattel has undertaken a transformational restructuring, redefining the very nature of its business as an entertainment and play company, rather than just a toy company. Films, TV series, experiential events, and sprawling licensing agreements globally have driven Mattel’s growth, says Kreiz. Rather than focus first on toys, Mattel now creates valuable IP, upon which its products are based.
“Our overall performance this quarter and comprehensive topline growth is adding momentum to our transformation strategy,” Kreiz said. “We are now firmly in growth mode and establishing Mattel as an IP-driven, high-performing toy company.”
The numbers appear to support that view, as 2020 was a banner year for Mattel, and that success has continued into the first six months of 2021, as net sales were up 43% versus the prior year’s first six months.
Where Mattel Earned Its Revenues
As a global company with a wide range of products and services, Mattel’s bottom line is made up of many parts.
For example, Net Sales in the North America segment increased 30% as reported, and 29% in constant currency, versus the prior year’s second quarter. That’s good, but not as impressive as the company’s bounce in the Europe, Middle East and Africa region (EMEA), where Mattel’s growth clicked in at 54%, and sales exceeded the industry average by 11 percentage points.
The following data breaks down Mattel’s results by product and segment.
Gross Billings in the North America segment increased 30% as reported, and 29% in constant currency, driven by growth in Vehicles (including Hot Wheels, CARS, and Matchbox), Dolls (including Barbie, Spirit, and Polly Pocket), Action Figures, Building Sets, Games, and Other (including Jurassic World, Master of the Universe, WWE, and MEGA), and Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends).
Net Sales in the International segment increased 57% as reported and 47% in constant currency.
Gross Billings in the International segment increased 57% as reported, and 47% in constant currency, driven by growth in Dolls (including Barbie, Spirit, and Polly Pocket), Vehicles (including Hot Wheels, Matchbox, and CARS), Action Figures, Building Sets, Games, and Other (including Jurassic World, Masters of the Universe, MEGA, and Games), and Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends).
Net Sales in the American Girl segment increased 44% as reported and in constant currency.
Gross Billings in the American Girl segment increased 43% as reported and in constant currency, driven by higher billings of proprietary retail channels, partially offset by lower direct-to-consumer billings.
Reported Gross Margin increased to 47.5%, versus 43.6% in the prior year’s second quarter, and Adjusted Gross Margin increased to 47.5%, versus 43.8%. The increase in Reported and Adjusted Gross Margin was primarily driven by fixed cost absorption benefit associated with high sales growth in the quarter and savings from the Optimizing for Growth program, partially offset by input cost inflation in cost of goods sold.
Gross Billings by Categories
Worldwide Gross Billings for Dolls were $395 million, up 51% as reported, and 47% in constant currency, versus the prior year’s second quarter, primarily driven by growth in Barbie, American Girl, Spirit, and Polly Pocket.
Worldwide Gross Billings for Infant, Toddler, and Preschool were $229 million, up 15% as reported, and 12% in constant currency, primarily driven by growth in Fisher-Price and Thomas & Friends.
Worldwide Gross Billings for Vehicles were $266 million, up 68% as reported, and 62% in constant currency, driven by growth in Hot Wheels, Matchbox, and CARS.
Worldwide Gross Billings for Action Figures, Building Sets, Games, and Other were $258 million, up 32% as reported, and 28% in constant currency, primarily driven by growth in Jurassic World, Masters of the Universe, WWE, and MEGA, partially offset by Games, including UNO.
Dolls Help Drive Mattel Quarterly Revenue up 10% over Last Year