Mattel Cuts 2026 Outlook as Demand Slows; Tariff Refunds Lift Q3 Profit

Mattel now expects full-year 2026 adjusted EPS of $1.05 to $1.20 and adjusted operating income of $500 million to $570 million, a revised outlook issued after consumer demand weakened late in the third quarter and kept decelerating into the fourth.

The numbers tell two stories at once. Third-quarter net sales rose 4% as reported, 3% in constant currency, to $1.81 billion. Adjusted operating income climbed to $502 million from $395 million a year earlier. Adjusted EPS rose to $1.30 from $0.91. Tariff refunds did much of the lifting: an $88 million benefit that added 490 basis points to an adjusted gross margin of 55%, up 480 basis points year over year.

Strip that out, and inflation plus higher royalties more than offset gains from Mattel163, cost savings and favorable foreign exchange.

What does the new guidance contain?

Mattel's revised full-year framework, stated Thursday:

• Net sales growth of 1% to 4% in constant currency
• Adjusted gross margin of roughly 48%
• Adjusted operating income of $500 million to $570 million
• Adjusted EPS of $1.05 to $1.20

CFO Peter Griffith said the revision primarily reflects softer-than-expected point-of-sale trends, with a slowdown in the latter part of the third quarter that continued into the fourth. The trends were similar across major markets, he said. Asked whether the weakness was specific to Mattel or the wider toy industry, Griffith declined to distinguish between the two.

The guidance excludes tariff refunds recognized year to date and any further refunds recognized during the rest of 2026. Foreign exchange should benefit full-year net sales by roughly 1%, based on current spot rates.

Griffith said Mattel holds enough product to meet demand across the revised sales range. Retailer inventory has declined from a year earlier as retailers buy closer to the point of sale.

What drove the quarter?

Gross billings growth came from vehicles, challenger categories and dolls, partly offset by declines in infant, toddler and preschool products. Executive Advisor Paul Ruh said all vehicle brands grew. Doll growth came primarily from partner brands, including products tied to Netflix's K-Pop Demon Hunters, and was partly offset by declining Barbie billings.

Action figures and games grew by double digits, helped by Mattel163. Excluding Mattel163, challenger-category gross billings declined, mainly on the loss of the Pokémon license in the prior year and retailer orders shifting into the fourth quarter.

By region, in constant currency: North America gross billings rose 4%, Europe, the Middle East and Africa rose 3%, Asia Pacific jumped 15%. Latin America fell 3%.

What did the new CEO say?

On his first earnings call as chairman and CEO, Roger Lynch said the toy maker must sharpen its focus. "We must prioritize, concentrate resources on our greatest opportunities, and translate the strength of Mattel's brands and capabilities into more consistent financial performance," Lynch said.

He named Hot Wheels as the growth model. The brand, Mattel's largest, is approaching $2 billion in gross billings and is on track for its ninth consecutive record year. Lynch also cited demand for Mattel Brick Shop building sets and said the company is evaluating capacity worldwide to support growth.

Barbie remains a priority, but "the current performance is not where it needs to be," Lynch said. He plans to focus on the core product offering, innovation and broader appeal among adult fans and collectors. Barbie trends may have improved slightly in the third quarter, he said in the Q&A, but stayed down year over year.

Lynch framed the emphasis on toys as a change in focus rather than a change in strategy, with core-business strength supporting digital products, entertainment and live experiences.

What comes next?

Mattel expects to issue 2027 guidance with fourth-quarter results in February 2027, Griffith said, while declining to affirm earlier commentary about next year's performance.

On capital returns, the company repurchased $308 million of shares year to date, with roughly $1.2 billion remaining under its current authorization, Ruh said. Third-quarter results remain preliminary until Mattel files its Form 10-Q with the Securities and Exchange Commission.

The takeaway: tariff refunds dressed up a strong quarter, but the demand picture beneath it softened enough for Mattel to cut its full-year targets.