A challenging second quarter for Mattel (MAT) isn't getting CEO Ynon Kreiz down. That's because it's the summer of "Barbie" movie mania.
"We have captured a cultural moment," Kreiz told Yahoo Finance about the relatively surprising response by moviegoers to Warner Bros. (WBD) and Mattel's "Barbie" movie.
Kreiz hinted that the holiday shopping season could be strong for Barbie-related toys.
"Barbie" pulled in an estimated $155 million during its opening three-day domestic weekend, on the high end of most Wall Street analyst estimates. Through Tuesday, the film starring Margot Robbie and Ryan Gosling has hauled in about $214 million.
While the initial hype — and now success — of the Barbie movie has sent Mattel stock up 18% in the past month, the company's second quarter may unsettle some of the bulls.
Consumers continue to spend cautiously on toys, leading to declines in Mattel's sales for North America and gross billings. Adjusted gross profit margins were flat compared to a year ago as the company used promotions to clear through excess inventory.
"While comparisons improved from the first quarter, our second quarter financial results were negatively impacted as retailers continued to manage inventory levels and by some overall industry softness," Mattel CFO Anthony DiSilvestro said in a statement. "At this point, we believe the retail inventory correction is mostly behind us, and we look forward to meeting consumer demand for our product, as we enter the second half of the year and all-important holiday season."
Underscoring the caution, Mattel reiterated its full-year profit guidance despite beating projections for the second quarter.
Kreiz told Yahoo Finance that consumers spent more cautiously in the second quarter than his team thought. The company's guidance reflects that, he added, and third quarter point-of-sale trends have improved.
Shares fell 1.5% in pre-market trading on Thursday.
Here's an overview of Mattel's earnings:
The earnings rundown
Net sales: -12% year over year to $1.087 billion vs. estimate of $1.02 billion
Adjusted EPS: -44% year over year to $0.10 vs. estimate for a loss of $0.03
What else caught our attention
Second quarter gross billings declined 18% year over year in North America
Mattel reiterated its full-year EPS guidance of $1.10 to $1.20 (consensus estimate: $1.16)
Mattel reiterated its full-year free cash flow guidance of about $400 million
Second quarter inventory levels fell 18% from the prior year
What analysts are saying post-earnings
"A solid 2Q beat and maintained FY guide sets up an achievable 2H. The retail channel is mostly back to normal, but not fully, and MAT now expects the industry modestly down, though to gain share driven by Dolls and Vehicles. There could be some Barbie-related 2H strength, and margins are improving, but we continue to see limited upside on both valuation and the broader industry dynamics." -Andrew Uerkwitz, Jefferies
"Mattel reported 2Q results that came in ahead of expectations, albeit for a period that's seasonally less important for the category. As anticipated, the biz posted y/y declines with performance hampered by efforts to clear excess inventory, but demonstrated improvement on a sequential basis, with growth expected to return beginning in 3Q. This outlook is partly underpinned by the success Barbie is currently enjoying in theaters, which makes Mattel less susceptible to a weaker toy market outlook, in our opinion." -Drew Crum, Stifel
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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