Mattel Shares Surge on Strong Profit Forecast Despite Tariff Concerns

Mattel Inc. (MAT) shares surged on Wednesday after the toy maker announced plans to mitigate the impact of new U.S. tariffs on China, Mexico, and Canada by leveraging its supply chain and potentially implementing price increases. The company's stock rose more than 12% in premarket trading, following the announcement.

Mattel expects net sales to grow 2% to 3% in 2025 compared to 2024, with adjusted earnings per share (EPS) of between $1.66 and $1.72. The guidance includes the anticipated impact of new U.S. tariffs on China, Mexico, and Canada, as well as the company's planned mitigating actions.

UBS analysts noted that Mattel's projection of 2025 EPS growth was a big surprise, given the U.S. tariffs on China, Canada, and Mexico. They suggested that Mattel's mitigating efforts could include a combination of shifting production out of China, pricing, and supply chain optimization.

Mattel sources its toys from seven countries, with China expected to make up less than 40% this year, compared to an industry average of about 80%. By 2027, the company expects no single country to represent more than about 25% of total global production. This diversification helps Mattel avoid the brunt of tariffs imposed on Chinese imports.



Mattel's strong profit forecast comes despite the challenges posed by tariffs and a shorter holiday shopping season in 2024. The company's Barbie brand, in particular, has shown resilience, with gross sales increasing since 2018. In 2021, Barbie brand gross sales hit $1.7 billion worldwide, the highest since 2013.

Mattel's focus on IP-driven toy business and expansion of entertainment offerings also contributes to its long-term growth prospects. The company's diversified product portfolio and global reach help it maintain consistent growth even in the face of economic downturns or regional fluctuations.

In conclusion, Mattel's strategic shift in supply chain and pricing strategies, coupled with its strong profit forecast, indicates that the company is well-positioned to navigate the challenges posed by tariffs and maintain its profitability in the long term. Investors should consider Mattel as a solid investment opportunity, given its strong fundamentals and growth prospects.