MATTEL INC /DE/ Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Highlights: 2024 was a successful year with growth in profitability, gross margin, and free cash flow. The optimizing for profitable growth program achieved $83M in savings. Hot Wheels had its seventh consecutive record year. Fisher-Price returned to growth. Entertainment strategy advanced with films, TV shows, digital games, and live events.
• 2025 Priorities: Grow top and bottom line, increase investment in digital game self-publishing, launch new products tied to movie releases (e.g., Disney's Snow White, Wicked movie), expect toy industry to be comparable to slightly up, and continue entertainment progress with films in production and development.

Segment Performance

• Fourth Quarter:
  • Dolls: Gross billings declined 3% primarily due to a 13% decline in Barbie, partly offset by growth in Monster High.
  • Vehicles: Grew 16%, driven primarily by Hot Wheels (up 17%).
  • Infant, Toddler, and Preschool: Declined 4%, with Fisher-Price growing 4% due to Little People and Fisher-Price Wood.
  • Challenger categories: Collectively grew 6%, driven by double-digit growth in Action Figures and Games, partly offset by a decline in Building Sets.
• Full Year:
  • Dolls: Gross billings declined 8% due to movie-related comparison in Barbie (Barbie down 12%), with Monster High up.
  • Vehicles: Grew 10% (Hot Wheels achieved seventh consecutive record year), with Disney Pixar Cars and Matchbox contributing.
  • Infant, Toddler, and Preschool: Declined 4%, with Fisher-Price growing 4% from FP Wood and Little People.
  • Challenger categories: Collectively grew 3%, driven by games (UNO double-digit growth) and Action Figures, partly offset by a decline in Building Sets.

Guidance

• Net sales in constant currency expected to increase 2%-3% in 2025.
• Adjusted EPS expected to grow 2%-6%.
• Free cash flow expected to be approximately $600M.
• Target $600M share repurchases in 2025, subject to market conditions.
• Anticipated impact of new U.S. tariffs on China, Mexico, Canada, with mitigating actions including leveraging supply chain and potential pricing.

Risks

• Uncertainties related to forward-looking statements, including risks from significant uncertainties that could affect actual results, such as trade tariffs, macroeconomic risks, and unexpected disruptions.

Question and Answer

Q: Stephen Laszczyk from Goldman Sachs asks about confidence in 2025 top line growth and retail partner demand.

A: Ynon Kreiz talks about vehicle, game, doll, infant/toddler/preschool, and action figure drivers, and Anthony DiSilvestro mentions Q1 factors and tariff mitigation.

Q: Alex Perry with Bank of America asks about first quarter sales and tariff mitigation.

A: Anthony DiSilvestro discusses first quarter headwinds and tariff mitigation strategies.

Q: Chris Horvers with JPMorgan asks about gross margin drivers.

A: Anthony DiSilvestro talks about headwinds (cost inflation, tariffs) and tailwinds (mitigating actions, scale benefit, cost savings).

Q: Arpine Kocharyan with UBS asks about Hot Wheels and pricing actions.

A: Ynon Kreiz discusses Hot Wheels growth and Anthony DiSilvestro talks about pricing action mitigation.

Q: Eric Handler with Roth Capital asks about entertainment bucket and Mattel Brick Shop.

A: Ynon Kreiz talks about entertainment strategy and Mattel Brick Shop opportunity.

Q: Fred Wightman with Wolfe Research asks about industry outlook and Mattel Brick Shop.

A: Ynon Kreiz discusses industry outlook and Mattel Brick Shop potential.

Q: Linda Bolton-Weiser with D.A. Davidson asks about tariff impact on competitiveness.

A: Ynon Kreiz talks about supply chain as a competitive advantage and tariff mitigation.