Mattel shares rise 5% on 'strong' Black Friday sales

Mattel (NASDAQ:MAT )'s stock price experienced a 5.1% increase following optimistic remarks made by company executives at the Morgan Stanley (NYSE:MS ) conference.

The executives highlighted a "strong" Black Friday performance, which has bolstered investor confidence. In comparison, Hasbro (NASDAQ:HAS ), a peer company that also presented at the conference during the premarket session, saw its shares climb by 2.2%.

Mattel expressed confidence in their growth prospects for the fourth quarter and reaffirmed their commitment to meeting the full-year guidance. The company has seen momentum across its key brands, with Hot Wheels on track to record its seventh consecutive year of record sales.

Despite this positive trend, Mattel still anticipates a decline in the toy industry in 2024, albeit a smaller decrease than initially expected at the beginning of the year.

Looking ahead to 2025, Mattel is optimistic about its movie slate, describing it as "very strong." The company also anticipates continued improvement in its gross margin line, suggesting that the combination of gross margin control and administrative expense management will likely lead to further operating margin growth in 2025.

To safeguard its gross margin, Mattel plans to adjust pricing if necessary to counteract the impact of tariffs. The company also aims to reduce its reliance on China for product sourcing, which currently stands below 40%, in contrast 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 sourcing. Presently, 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 fuel organic growth, maintaining an investment-grade rating with a leverage ratio target between 2x and 2.5x, exploring strategic mergers and acquisitions that align with the company's growth profile, and executing share buybacks.

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Source: Investing.com