Even Mattel, the iconic toymaker behind several culture defining brands like Barbie and Hot Wheels, is making a move. The company announced that it’s going to raise prices on some of its products in response to rising costs from U.S. tariffs. The company is reportedly having extreme difficulties with its supply chain. Yet it is the most bruised, largely because of its extreme dependence on Chinese imports. Mattel directly imports more than a fifth of all of its products sold in the United States from China. The company intends to reduce this average to under 15% before the end of next year.
As for the toy giant’s other cost-saving measures, Hasbro has made it work, producing about $1 billion in overage expenses. Among these strategies is rerouting transportation routes, including moving cars from Mexico to Canada to avoid U.S. tariffs. Mattel has realized that if they want to win in such a cut-throat market, they must change. Simultaneously, they’re managing the intricacies of international trade policies.
U.S. tariffs, initiated under President Donald Trump’s administration, have imposed additional financial burdens on Mattel’s operations. The company seems to be recognizing that these added costs will soon need to be passed through to consumers in order to keep the service affordable. With the U.S. accounting for about half of Mattel’s global toy sales, this market remains crucial for the company’s revenue.
In light of these events, Mattel has gone out on a limb. So much so that they will no longer provide annual earnings guidance to investors due to the vagaries of trade policy. David Weinberg, Chief Financial Officer of Mattel, emphasized the unpredictable nature of the current market environment:
“The current environment is simply too dynamic from which to plan results with a reasonable assurance of success.” – David Weinberg
Nussbaum insists that Mattel’s import strategy doesn’t just run through China, noting that the company sources products in countries such as Indonesia, Malaysia and Thailand, too. The company is continuing to intensify its focus on cost controls and avoiding risk. In line with this strategy, they will cut the number of toys they have made in China for the American market.
David Zinsner, Mattel’s new Chief Financial Officer, last week voiced concern about possible adverse economic effects due to continued escalating trade conflicts. He stated,
“The very fluid trade policies in the US and beyond, as well as regulatory risks, have increased the chance of an economic slowdown with the probability of a recession growing.” – David Zinsner
Mattel’s been riding a stormy sea lately. To those in the industry, observers are closely watching the first movers’ pricing strategy and its effects on sales and consumer habits. As we continue to shape Mattel’s future, the biggest wildcard is the uncertainty surrounding trade policies.