Mattel Cuts Full-Year Forecast as Barbie Drags on Dolls Ahead of Holidays

Mattel lowered its full-year guidance ahead of the holiday season even as third-quarter net income jumped 27% to nearly $354 million, according to a Thursday press release. Net sales rose 4% year over year to $1.8 billion. The toy maker now expects net sales growth of 1% to 4%, down from its prior forecast of 3% to 6%, and operating income of $500 million to $570 million, down from $580 million to $630 million. The revised guidance excludes tariff refunds recognized year to date and any additional refunds for the rest of the year.

The cut lands in the first weeks of Roger Lynch's tenure as CEO. He addressed the company's core brand problem directly on his first earnings call.

What does the Barbie slump change for Mattel?

"Barbie is a priority, but the current performance is not where it needs to be," Lynch said. Gross billings in dolls rose 4% year over year to $703 million, but that growth came from KPop Demon Hunters. Barbie dragged on the category.

"Barbie is one of the most iconic and recognized brands in the world, and the number one doll globally," Lynch said. "We know consumers respond when we bring them compelling product, content and cultural moments. Our focus is on doing that with more consistency with Barbie."

Before Lynch was named CEO in September, Mattel had already flagged the need to focus on the doll. It launched a campaign dubbed "Barbie is Moving," which includes brand partnerships, consumer products and new packaging.

Hot Wheels offers the counterexample. Mattel's largest brand is on track for its ninth consecutive record year and is approaching $2 billion in gross billings. "Hot Wheels is perhaps the clearest example of what our brand-centric strategy can look like when we execute well," Lynch said.

Analysts caution that iconic brands alone will not carry the company. "Those are iconic franchises, but that doesn't automatically translate into sales," Emarketer analyst Zak Stambor said in written statements on Thursday. "The company needs to give consumers reasons to buy, whether through fresh products, new experiences, or tapping into the trends kids and kidults are excited about."

Who is running Mattel now?

The leadership bench has been rebuilt in stages:

• Steve Totzke was named president and chief operating officer, effective Wednesday.
• Peter Griffith became chief financial officer a little over two weeks ago, the second CFO in under 18 months. His predecessor, Paul Ruh, serves as an adviser until the end of the year.
• Chief Marketing and Brand Officer Roberto Stanichi is leaving to join Netflix — a notable loss for the marketing function as the "Barbie is Moving" campaign gets underway.

Investor pressure is also building. Southeastern Asset Management pushed Mattel to explore a potential sale this spring, and Ariel Investments did so again in October. "I want to acknowledge there's been considerable external commentary about the company recently," Lynch said. "As I step into the CEO role, I see significant opportunity to improve our focus and execution."

Stambor framed the stakes plainly: "Mattel's decision to lower its sales and profit forecasts heading into the holiday season is not the kind of news new CEO Roger Lynch wanted. He's already under pressure from investors to turn the company around, and these results suggest he has his work cut out for him."

The broader market gives Lynch room to work. The U.S. toy industry posted its best first-half performance in six years, up 17% year over year, according to a recent report by Circana. When an analyst asked Lynch for his catchphrase or mission statement, he replied: "Oh give me a break, I just got here."

His answers will need to arrive quickly, with the holiday quarter deciding whether the lowered forecast holds.