'Barbie' buzz likely just a flash in the pan for toymaker Mattel

The fanfare around Margot Robbie-starrer "Barbie" could jolt the iconic Mattel doll's sales out of a year-long slump, but Wall Street thinks the party in pink will be short-lived.

While Mattel will report second-quarter results on Wednesday, days after the theatrical release of the movie, analysts say the boost for Barbie sales will be most pronounced in the quarter ending Sept. 29 before tapering off.

The company will likely get a small cut of the movie's box-office innings, though the biggest benefit is expected to come from toy sales following the marketing blitz around its release. Retailers worldwide have also pitched in, with brands from Zara to H&M and Gap rolling out themed merchandise like Barbie hoodies, perfumes, and toothbrushes.

UBS' Arpiné Kocharyan expects the movie's release to have an "overall halo effect" on the franchise, with the larger opportunity in consumer products as the film targets an older audience.

"This might not move the needle for revenues, but could impact Mattel's earnings, given substantially higher margin of more than 80% on royalty stream," Kocharyan added.

The live-action movie, which also stars Ryan Gosling as Ken, raked in $155 million in the United States and Canada over the weekend, making it the biggest opening at the box office for 2023, distributor Warner Bros said on Sunday.

Still, not everyone seemed convinced.

"Although there is plenty of buzz around the film, I don't expect the movie to generate a significant boost to sales for Mattel as the movie isn't geared towards the target market (young children) and is rated PG-13," said Zachary Warring, equity analyst at CFRA Research.

Carol Osborne, a marketing faculty at University of South Florida's Muma College of Business, said the hype around the "Barbification of the world" will soon subside.

For the second quarter, Mattel is set to report falling sales and a net loss of 2 cents per share, compared with a profit of 18 cents a year ago, as the company continues to reel from higher costs, slowing consumer spending amid high inflation, and retailers cutting back on inventories.

Barbie was Mattel's top brand from 2019 to 2022, according to company data. But its gross billings - or the amount invoiced to customers - fell behind Hot Wheels in the first quarter of 2023.

The toymaker's shares, which have gained about 19% so far in 2023, were up about 1.4% in premarket trading on Monday. Rival Hasbro's shares have risen 5% this year.

Mattel's forward 12-month price-to-earnings multiple (P/E), a common benchmark for valuing stocks, is 16.01, higher than 13.6 for Hasbro.