This Well-Known Toy Company Is Set to Be an Outperformer if the Tariff War Continues

Eric Volkman, The Motley Fool

Sat, May 10, 2025, 6:23 PM 4 min read

• It clearly has a sensible strategy to dampen its effects.

• When the dispute ends, the company is well positioned to grow its business.

• 10 stocks we like better than Mattel ›

Mattel's (NASDAQ: MAT) stock was something of a hot item after the toy company reported its first-quarter results in early May -- and not only because it scored a double beat on analyst estimates. At a time when investors are worried about the impact of the current tariff war on American commerce, the company's management said the right things about its ability to weather the storm.

Here's a look at what management intends to do about the situation, and why both investors and analysts were pleased with the company's strategy -- not to mention those quarterly figures.

Mattel's fundamentals headed in the right direction, with net sales ringing up at a bit under $827 million for year-over-year growth of 2%. Non-GAAP (adjusted) net loss per share narrowed, meanwhile, to $0.03 from the year-ago shortfall of $0.05.

Better, the two line items came in far ahead of the consensus analyst estimates of $786 million on the top line and $0.09 per share for adjusted net loss.

Tariffs are front and center of many investor worries these days. To its credit, Mattel addressed the situation clearly and directly. The good news right off the bat is that not only did the levies fail to affect Q1 performance, they probably won't do so in Q2 either.

This is down to what management described as "the timing of inventory flows," a flowery way of saying the company has essentially secured most of the goods it needs for this quarter's manufacturing.

Beyond that (should the tariff tussle last that long), Mattel has come up with a set of actions to dampen the effect of higher costs of affected goods. It said it is speeding up the diversification of its supply chain generally, reducing its dependence on China, and "optimizing product sourcing and product mix." Last but surely not least, it'll adjust prices strategically for U.S. consumers if need be.

Mattel has a degree of flexibility here; in the conference call discussing the quarter, CEO Ynon Kreiz said that the company sources products from business partners located in seven countries.

Another nugget the Mattel leader dropped was that China is responsible for less than 40% of worldwide production of the company's toys. While that's still a chunky number, it's well below what Kreiz said is the current 80% average of the toy industry.