It has been about a month since the last earnings report for Mattel (MAT). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Mattel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.
Mattel Q1 Earnings Beat Estimates on Vehicles-Led Net Sales
Mattel reported first-quarter 2026 results, with adjusted earnings and net sales beating the Zacks Consensus Estimate. Revenues improved, while the bottom line fell from the prior-year quarter levels.
The company posted an adjusted loss of 20 cents per share, narrower than the Zacks Consensus Estimate of a loss of 24 cents by 16.67%. The bottom line declined from an adjusted loss of 2 cents reported in the prior-year quarter.
Net sales of $862 million topped the consensus mark of $801 million by 7.59% and increased 4% year over year. Gross billings, a key demand indicator in the toy industry, rose 2% year over year in constant currency to $972 million, led by Vehicles' momentum.
MAT Sees International Growth Cushion U.S. Softness in Q1
Segment results reflected a clear geographic split in the first quarter. International net sales rose 15% year over year to $387.0 million, driven by broad-based growth across EMEA, Latin America and Asia Pacific. Management also cited positive consumer demand trends, with global point-of-sale up mid-single digits.
North America remained pressured. Net sales declined 3% year over year to $475.1 million, down from $491.4 million a year ago. Management attributed the softness primarily to U.S. retailer ordering patterns shifting from direct import to domestic shipping, while noting those patterns appear to be stabilizing and expecting the region to return to growth in the second quarter.
Mattel Vehicles Lead Growth as Dolls and ITPS Weaken
Category performance again highlighted Vehicles as the primary engine. Worldwide gross billings for Vehicles increased 17% year over year to $361 million, or 13% in constant currency, supported by continued momentum in Hot Wheels. Management also pointed to double-digit growth for Hot Wheels and Disney and Pixar’s Cars within the Vehicles portfolio.
Other categories trended lower. Dolls gross billings declined 8% year over year to $272 million, primarily due to lower Barbie results, partially offset by Monster High. Infant, Toddler and Preschool gross billings fell 16% year over year to $106 million, reflecting weaker Fisher-Price performance, though Little People delivered double-digit growth. Action Figures, Building Sets, Games and Other increased 21% year over year to $233 million, aided by Games growth (including a partial-quarter contribution from Mattel163), strength in Action Figures tied to owned and partner properties, and continued expansion of Mattel Brick Shop.
MAT’s Q1 Margin Slides on Tariffs, FX & Inflation Headwinds
Profitability deteriorated despite the stronger net sales performance. Adjusted gross margin declined 450 basis points year over year to 45.1%, reflecting a higher cost environment and limited near-term offsets.
Management quantified the year-over-year pressure as 240 basis points from the gross incremental cost of tariffs, 140 basis points from unfavorable foreign exchange and 90 basis points from inflation. Tariff mitigation actions and savings initiatives provided partial relief, but the net impact weighed on gross profit in the quarter. Mattel reiterated its expectation for sequential improvement as the year progresses, with the second quarter still below 50% and stronger margin performance anticipated in the second half.
Mattel’s Expenses Rise With Marketing and Strategic Spend
Operating costs moved higher as Mattel invested in brands and growth platforms. Advertising and promotion expense increased $23.0 million year over year to $92.9 million, reflecting the timing of Easter and the inclusion of Mattel163 expenses.
SG&A also rose as strategic initiatives ramped. On an adjusted basis, SG&A increased $19.0 million to $366.3 million, which management attributed primarily to the company’s strategic investments. Mattel reiterated its plans for approximately $150 million of investments in 2026 to accelerate growth and profitability across self-published mobile games, building sets, DTC, first-party data, and technology and infrastructure. The company also highlighted ongoing progress integrating Mattel163 and pointed to an entertainment slate that includes the global theatrical release of Masters of the Universe on June 5.
MAT’s Cash Flow Weakens on Mattel163 and Buybacks
Cash generation turned negative in the quarter as the company executed on capital allocation priorities. Cash flows used in operating activities totaled $22.9 million, against an inflow of $24.8 million reported in the year-ago period.
Investing activity was also elevated. Cash flows used in investing activities were $143.6 million, primarily tied to cash paid for the Mattel163 acquisition (net of cash acquired) and higher capital expenditures.
Capital spending increased to $65.1 million, resulting in free cash flow of negative $88.1 million. Mattel repurchased $200 million of shares during the quarter and reiterated its target of $400 million in repurchases for 2026, while ending the period with $866 million of cash and equivalents and $2,332.8 million of long-term debt. Inventory was $676.9 million at quarter’s end, a modest increase year over year that management linked to tariff-related costs.
MAT Reaffirms 2026 Outlook as Q2 Shipping Accelerates
Management reaffirmed its 2026 outlook, projecting net sales growth of 3% to 6% in constant currency. The company also expects adjusted gross margin to be approximately 50% for the full year, with sequential improvement through 2026 and stronger performance in the second half.
On a recast basis, Mattel guided to adjusted operating income of $580 million to $630 million and adjusted earnings of $1.27 to $1.39 per share, with an adjusted tax rate of approximately 24%. Management also pointed to top-line acceleration early in the second quarter, supported by stronger shipping trends and expectations that U.S. ordering patterns will stabilize, as the company advances its IP-driven play and family entertainment strategy alongside continued integration of Mattel163.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -50.73% due to these changes.
VGM Scores
Currently, Mattel has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a score of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mattel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Mattel, Inc. (MAT): Free Stock Analysis Report
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