By Granth Vanaik
(Reuters) – Mattel beat Wall Street estimates for second-quarter profit on Tuesday, aided by the toymaker’s tight cost controls while posting a surprise drop in sales.
The Barbie maker has set a target of saving $200 million in costs by 2026 through initiatives such as streamlining its supply chain and plans to exit or out-license underperforming product lines.
Along with falling inventory management and input expenses, the efforts helped gross margins climb 410 basis points to 49.2% in the quarter.
The Hot Wheels maker’s adjusted profit of 19 cents per share beat estimates of 17 cents, according to LSEG data.
Net sales fell 1% to $1.08 billion, amid a shift among consumers to spend more on experiences and services. Analysts had projected a marginal rise to $1.10 billion.
The company, which maintained its full-year profit and sales forecasts, also posted a drop of 18% in advertising and promotional expenses.
This comes as monthly sales report from Costco suggested a pickup in demand for toys since April.
Mattel CEO Ynon Kreiz said the company was well-positioned for the second-half, with new product innovation and increased retail support.
“We do expect the toy industry to decline modestly in the year, but this is an improvement from our outlook at the start of the year … And based on our internal research, we’re seeing that consumers are planning on purchasing toys this holiday season,” Kreiz added.
Meanwhile, Reuters reported on Monday that buyout firm L Catterton had approached Mattel with an acquisition offer. The move could also prompt other suitors, including rival Hasbro, to consider bids, the report said.
Kreiz reiterated on Tuesday he was confident in the company’s strategy to create long-term shareholder value as standalone company.
Mattel has struggled since the blockbuster commercial success and acclaim of the Barbie movie boosted sales last year.
(Reporting by Granth Vanaik in Bengaluru; Editing by Sriraj Kalluvila)
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