Toymaker Mattel's quarterly loss smaller than expected as cost cuts pay off

By Granth Vanaik

April 23 (Reuters) - Mattel posted a smaller-than-expected loss for the first quarter on Tuesday, helped by the Barbie maker's tight leash on costs while demand remains tepid for its toys and games.

The toymaker has planned to exit less profitable brands, consolidated its American Girl operating segment and streamlined its supply chain as part of efforts to achieve $200 million in savings by 2026.

"We are off to a good start for the year with significant margin expansion and very strong improvement in free cash flow," CEO Ynon Kreiz said in an interview with Reuters.

Mattel's gross margin grew 8 percentage points to 48% in the first quarter, also in part due to easing input costs as well as lower inventory management expenses.

Rival Hasbro, which is expecting a bigger hit to revenue in the first half of 2024, has also undertaken workforce reductions to trim costs. It is set to report its first-quarter results on Wednesday.

Mattel's first-quarter sales of $809.5 million missed estimates of $831.8 million. The company posted an adjusted loss of 5 cents per share, compared with estimates of 12 cents, according to LSEG data.

The company, which reaffirmed its full-year sales and profit forecasts, said in February it expected the toy industry to decline in 2024 but at a slower rate than 2023.

Kreiz said on Tuesday while sales declined, consumer demand trends were improving during the quarter.

Net sales in its North American segment rose by 2% on a constant currency basis, compared to a 27% drop a year earlier.

Worldwide gross billings for Barbie, Mattel's biggest brand, rose 0.3% in the quarter, while Hot Wheels' billings rose 5%.

(Reporting by Granth Vanaik in Bengaluru)