Mattel, Inc (NASDAQ:MAT) shares opened 27% lower on Wednesday after the toymaker reported quarterly results that fell short of Wall Street expectations and outlined a year of strategic investments that are likely to pressure near-term earnings.
The company posted net sales of $1.77 billion in the fourth quarter, up 7% as reported and 5% in constant currency.
Net income fell 25% to $106 million, while adjusted earnings per share came in at $0.39, slightly above the prior year’s $0.35 but below analysts’ expectations of $0.42. Gross margins declined 480 basis points to 45.9%, reflecting heavier promotions and softer-than-expected US holiday demand.
Ynon Kreiz, Mattel’s chairman and CEO, acknowledged the mixed results but highlighted growth in key regions. “We achieved strong topline growth in the fourth quarter and consumer demand was positive in every region for both the quarter and full year, but December gross billings in the US ended up growing less than expected,” Kreiz told investors. “Our international business was positive for the year and we gained market share in key categories globally.”
The CEO also outlined the company’s strategic pivot toward a brand-centric, IP-driven model combining toys, digital games, and family entertainment. “2026 will be an important year for Mattel as we implement our new brand-centric strategy to grow our IP-driven play and family entertainment business,” he said, citing two upcoming movie releases and the expansion of digital games following the full acquisition of mobile games studio Mattel163.
Analysts at Jefferies described the results as a “transition year with added friction.” They noted that while Mattel remains disciplined on costs, posting $89 million in operating savings and reducing adjusted SG&A by 5% in Q4, the quarter exposed margin pressures and category weakness, particularly in Infant/Toddler/Preschool and Dolls.
Jefferies lowered its price target to $19, acknowledging near-term volatility but citing potential improvement in 2027 as strategic investments begin to pay off.
“Mattel is in the midst of a significant transition toward a more digital and entertainment-centric model,” analysts wrote. “(Strategic) investments of roughly $150 million in 2026 are weighing on near-term profitability, while volatility in US demand and year-end promotional actions have pressured margins.”