Cleaned Up Inventory at Retail Sets Mattel Up for Improving Profitability Heading Into the Holidays

Mattel continues to harvest gains from its turnaround, delivering above break-even operating margins starting in 2019 and reaching around 13% in 2022. We expect Mattel to produce further adjusted operating margin expansion ahead (after its rightsizing inventory at retail during the first half of 2023), benefiting from its $300 million cost-saving program. The shift to a capital-light strategy offers lower capital and operating expenditures than in the past (supporting profit growth while allowing for investment in product innovation), but profits could be hurt by tactical investments in dolls and vehicles capacity as well as logistics and input cost inflation.