Mattel results beat estimates as toy demand takes on inflation hit

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(Reuters) -Mattel Inc beat estimates for quarterly sales and profit on Thursday as shoppers shrugged off higher prices to snap up the toymaker’s action figures and Hot Wheels cars.

Demand for toys has so far withstood the decades-high inflation that has pummeled discretionary spending across America’s largest retailers and raised fears of a recession.

However, shares of California-based Mattel (NASDAQ:MAT) slipped about 3% in extended trade, after the company’s adjusted margins shrunk to 45% from 47.5% last year due to higher supply chain costs.

Mattel’s net sales jumped 20% to $1.24 billion in the second quarter, higher than analysts’ estimates of $1.10 billion, according to Refinitiv IBES data.

Rival toymaker Hasbro Inc (NASDAQ:HAS) also posted strong quarterly results earlier this week, leaning on higher prices and a raft of product launches such as new Nerf blasters.

Mattel is planning more price increases in the coming months to counter rising costs of raw materials, freight and labor.

However, Chief Executive Officer Ynon Kreiz said he was confident that toy sales would hold up even in a potential economic downturn, echoing comments from his counterpart at Hasbro.

“The toy industry is resilient and growing and performing well. We expect to gain share this year, and to outperform the industry,” Kreiz told Reuters.

Mattel said overall gross billings for its Hot Wheels toys rose 26% in the second quarter ended June 30, while the unit that makes action figures recorded a 44% jump, helped by demand for toys based on characters from the “Masters of the Universe” and “Jurassic World” franchises.

Kreiz also said the 44% increase in Mattel’s inventories in the quarter was needed to meet an expected increase in demand in the second half of the year.

Excluding one-time items, the company earned 18 cents per share, beating estimates of 6 cents.