TSX:TOY - Post Discussion
Post by
retiredcf on Apr 28, 2022 9:21am
RBC
Have a $63.00 target. GLTA
April 27, 2022
Spin Master Corp. Read-through from Mattel's Q1 results
Our view: Neutral for Spin Master. Mattel (not covered) reported Q1 Net Revenue of $1,041MM (+19% YoY), ahead of consensus of $917MM, while Adjusted EBITDA of $152MM was well ahead of consensus of $81MM. Despite a decline in POS in the quarter and the inflationary pressures ahead, Mattel reiterated its 2022 guidance and noted that the company is seeing strong consumer demand in Q2 thus far.
Key takeaways from Mattel's Q1 results and conference call:
• Q1 results ahead of expectations; we do not view the negative POS as relevant to Spin Master: The company reported a HSD POS decline for Q1, which marks a reversal from LSD growth in Q4 and LDD growth for 2021. As it relates to Spin Master, management highlighted on the call that North America POS was "down" YoY (due to the Easter calendar shift and promotional timing), while EMEA was "up" YoY. We view the POS commentary as more related to the specific offerings by MAT, and continue to believe that the Batman movie license is likely to drive significant YoY growth in Q1 for TOY. The movie performed well at the
box office, and we expect solid demand for the associated toy offering. • Guidance reiterated: Mattel reiterated its Net Revenue guidance for 2022 and 2023, which calls for +8%-10% growth in 2022 and HSD growth YoY in 2023. For context, we note that at Q1 reporting, Hasbro maintained its full year target of YoY Net Revenue growth in the low single-digit range and raised its guidance for Operating Profit growth to mid single-digits YoY (from low single-digits YoY previously). As it relates to Spin Master, we continue to expect strong growth through 2022, reflecting a notable slate of DC Comics films and continued growth for the Digital platform. See our notes on Spin Master's Q4 results here and our note following management meetings with investors here.
• Inflation and supply chain related headwinds noted: COGS inflation (mainly materials and ocean freight) was a ~550 bps YoY headwind to Mattel's Q1 GM % YoY, which was partially offset by pricing and cost reductions. Looking ahead, management reiterated on the call that they expect higher inflation in 2022 vs. 2021, which they expect will be followed by moderation in 2023. Mattel expects to raise prices again later in 2022 to try to offset "most" of the continued inflationary pressures. We note that Hasbro also highlighted that input/freight costs were higher across the business in Q1, which negatively impacted profits YoY. Given the industry-wide freight/supply chain issues and inflation pressures, we expect these will likely impact Spin Master's margins in Q1 to some extent as well. Spin Master has noted, however, that pricing and favorable mix contribution from higher-margin Digital revenue should serve as mitigating factors.
• North American retailers replenishing inventories: Mattel noted that Gross Billings growth in North America was +25% YoY in Q1, indicating that North American retailers are continuing to replenish inventories.Further, on the call management noted that retail inventory was up QoQ in both dollars and weeks of supply at the end of quarter as the company works with retailers to meet strong Q2 consumer demand.
Be the first to comment on this post