Mattel Shares Soar 5% on Strong Black Friday Sales

Mattel's stock price increased by 5.1% following optimistic comments made by the company's executives at the Morgan Stanley conference. The executives highlighted a "strong" Black Friday performance that boosted investor confidence. In comparison, shares of competitor Hasbro, which also attended the conference, rose by 2.2% in pre-market trading.

Mattel expressed confidence in its fourth-quarter growth expectations and reiterated its commitment to meeting year-end targets. The company has gained momentum in its core brands, with Hot Wheels on track to achieve record sales for the seventh consecutive year.

Despite this positive trend, Mattel still forecasts a decline in the toy industry for 2024, although this decline is expected to be less than previously anticipated at the beginning of the year. Looking towards 2025, Mattel is optimistic about its film program, describing it as "very strong." The company also expects a continuous improvement in gross margin, anticipating that the combination of gross margin control and management of administrative expenses will likely lead to greater operating margin growth by 2025.

To maintain its gross margin, Mattel plans to adjust pricing as necessary to counteract the effects of tariffs. Additionally, the company aims to reduce its reliance on product supply from China, which currently stands at less than 40%, compared to the industry average of 80% to 85%.

By 2027, Mattel's strategy is to ensure that no single country accounts for more than 25% of its supply. Currently, less than 10% of Mattel's products are sourced from Mexico, and the company does not source from Canada.

In terms of capital allocation, Mattel's priorities include investing to support organic growth, maintaining an investment-grade rating with a targeted leverage ratio between 2x and 2.5x, exploring strategic mergers and acquisitions suited to the company's growth profile, and executing share buybacks.