Mattel, the iconic toymaker of El Segundo, California, is moving its production overseas and slashing prices. They’re moving to address the persistent problems with these tariffs. This year, the company will shift at least 500 products from Chinese-based manufacturers to other countries’ producers. That comes on the heels of last year’s successful relocation of nearly 280 products. This new initiative is a welcome step in remedying the financial toll that tariffs on Chinese imports have taken. These tariffs have had a dramatic effect on both pricing and profit margins.
In its third-quarter earnings report released yesterday, Mattel announced a jaw-dropping loss of $40.3 million (€35.5 million) for the quarter. This figure is more than last year’s shortfall of $28.3 million (€24.9 million) over the same time frame. This wider loss comes despite larger-than-expected first-quarter sales, showcasing the complexities faced by the company in navigating current market conditions.
China currently accounts for 40% of Mattel’s global production, making the transition of manufacturing sites essential for the company’s long-term strategy. Despite Mattel’s top brass teams stating that diversification is needed, they admitted that their industry-wide need for diversification came with the need for price hikes. Analysts estimate a price raise on 40%-50% of Mattel’s toys. Customers are going to pay on average $20 (€17.60) additional because of economic burdens of tariffs.
Mattel hasn’t raised any tariffs of its own. The firm is suffering the effects of a 145% tariff on its goods, on the majority of products manufactured in China, enacted by the Trump administration. This regulatory environment has resulted in an uncertain toy manufacturing and retail landscape.
Ynon Kreiz, CEO and Chairman of Mattel, emphasized the importance of evolving to meet today’s challenges. Here’s what he had to say during a recent earnings call with analysts on that question.
“The diversified and flexible supply chain in global commercial organizations are clear advantages to Mattel in this period of uncertainty.” – Ynon Kreiz, CEO and Chairman of Mattel.
Mattel’s new leadership has found it hard to forecast consumer spending and U.S. sales for the full-year. This obstacle remains despite their attempts to diversify manufacturing out of China. The prevailing economic climate continues to be the most important aspect shaping the company’s day-to-day interactions and approaches to the market.
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