Resilient Toy Demand Positions Narrow-Moat Mattel for Consistent Profit Margin Delivery Ahead

Mattel continues to harvest gains from its turnaround, delivering above breakeven operating margins starting in 2019 and reaching 13.7% in 2024. Despite the outlook for modestly positive sales growth, we expect Mattel to produce a flattish operating margin in 2025 even with foreign exchange headwinds, thanks to its $200 million cost-saving program (2024-26). Additionally, the firm's shift to a capital-light strategy has led to lower capital and operating expenditures than in the past, supporting profitability while allowing for investment in product innovation. However, profits could be held back by tactical investments in dolls and vehicles as well as input cost inflation.