Mattel CEO: We will be cautious with price increases

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Barbie-maker Mattel (MAT) is eyeing price increases on its popular toys amid inflation in its supply chain, in part fueled by a boom in demand during the COVID-19 pandemic.

But unlike other companies in consumer products raising prices right now to protect profits, Mattel plans to be more cautious on hikes as to not dent demand on items that tend to be pretty affordable for shoppers.

"We already implemented price increases, and this will come into effect in the second half of the year," Mattel Chairman and CEO Ynon Kreiz told Yahoo Finance Live. "We always have the consumer in mind, and we aim to find the right balance between quality and value. We believe we have the right equilibrium, and we don't expect to impact consumer demand."

To be sure, it appears Mattel has the cover to successfully push through prices increases that will likely show up for most shoppers this holiday shopping season.

The turnaround at Mattel under Kreiz continued to play out in the second quarter as it sold large volumes of Barbies, Hot Wheels, American Girl dolls and WWE action figures to consumers.

PARIS, FRANCE - DECEMBER 01: A woman wearing a protective face mask looks at various Barbie dolls on display in the window of a toy store for Christmas on December 01, 2020 in Paris, France. The reopening of stores selling
A woman wearing a protective face mask looks at various Barbie dolls on display in the window of a toy store for Christmas on December 01, 2020 in Paris, France. (Photo by Chesnot/Getty)

Mattel reported Tuesday evening that second-quarter net sales rose 40%. Adjusted operating profits clocked in at $66.6 million from a loss of $27.6 million a year ago.

Worldwide gross billings for dolls surged 51% from a year earlier on the back of strength in Barbie and American Girl. Momentum behind Hot Wheels and Matchbox sent worldwide gross billings for Mattel's vehicles segment up 68%.

Adjusted gross profit margins improved 370 basis points from a year ago despite inflationary pressures.

Here is how Mattel performed compared to Wall Street analyst forecasts for the second quarter:

  • Net sales: $1.03 billion vs. $875.8 million

  • Adjusted EPS: $0.03 vs. a loss of $0.06

  • 2021 outlook: Net sales growth of 12% to 14% (constant currency), more than double prior estimate; adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] of $875 million to $900 million (up $75 million from prior outlook)

Mattel shares rose 5% in Wednesday trading, extending its year-to-date run to 24%. The company added it sees 2022 adjusted EBITDA exceeding $1 billion as it expects to grow behind brands such as Barbie, Matchbox and others.

"The quarter was solid across measures that matter," Jefferies analyst Stephanie Wissink wrote in a research note to clients.

What may also matter to investors is Mattel's capital allocation plans moving forward.

Kreiz said he views the company as being in growth mode now (as opposed to being in a transformation as in recent quarters). In turn, he sees "optionality" for Mattel — or the potential to consider the implementation of a dividend and stock buyback plan.

"So a lot of progress on the balance sheet and with that, we will have optionality. We haven't been specific about what we will do with the excess that we will generate, but the key message is that optionality and whatever we do will be to create value for shareholders," Kreiz says.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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