Analyst Note| Jaime M. Katz, CFA |
As the global consumer began to resume their pre-COVID-19 activities, narrow-moat Mattel continued to benefit from healthy demand. While lapping a weak second quarter in the year-ago period (when net sales were down 15%), second-quarter fiscal 2021 net sales were 19% higher than the same period in 2019 (at $1.0 billion). Most of Mattel’s categories posted solid second-quarter results versus 2019, with sales of dolls up 44%, vehicles higher by 24%, and the challenger lines up 16%. The infant and toddler business seems to be stabilizing, posting sales growth in three of the last four quarters, but sales remain down 9% from second-quarter 2019 levels. Geographically, sales were broad-based, with net sales in North America up 30% (55% of sales) and international up 57%. More impressive was the progress Mattel made in profitability, with the adjusted gross margin rising 370 basis points, to 47.5%, a second-quarter level not seen since 2015. That was also the last year Mattel delivered positive EPS in a second quarter, with 2021 posting $0.03 in adjusted EPS.