A global toy and family entertainment company, Mattel makes beloved brands including Barbie, Hot Wheels, Fisher-Price, American Girl, Thomas & Friends, Masters of the Universe, UNO, and MEGA. It was founded in 1945 in Los Angeles by Harold "Matt" Matson, Elliot Handler, and Ruth Handler, who combined "Matt" and "El" from the founders' names to create the company name. Fun fact: the Barbie doll, launched in 1959, was named after Ruth Handler's daughter Barbara, and Barbie's boyfriend Ken was named after the Handlers' son Kenneth.
Mattel's Q2 gross margin fell 2.8 points to 48.2% as tariffs and cost inflation outweighed a 10% revenue increase.
Mattel returned to an in Q2, but it was razor-thin. rose 10% to $1.13 billion, yet contracted 2.8 points to 48.2% as incremental tariffs and cost inflation hit, and a increase in advertising spending pushed operating income down 86% to just $10.9 million. The company is growing its top line again, but at a much higher cost.
Key takeaways
rose 10% to $1.13 billion, driven by a 35% increase in Action Figures, Building Sets, Games, and Other and a 14% increase in Vehicles, while Dolls and Infant, Toddler, and Preschool declined.
fell 2.8 points to 48.2%, as 170 of incremental tariff costs, 120 basis points of cost inflation, and 110 basis points of higher royalties were only partially offset by a 120-basis-point benefit from the acquisition.
dropped 86% to $10.9 million, as advertising and promotion expenses rose 3.2 points to 11.0% of , reflecting investment in the newly acquired , theatrical releases, and brand marketing.
Section summaries
Management's Discussion and Analysis
Q2 2026 net sales rose 10% to $1.13B, but gross margin fell to 48.2% on tariffs and inflation, driving a net loss.
⌄
Consolidated grew 10% to $1.13B, driven by a 35% surge in Action Figures, Building Sets, Games, and Other and a 14% increase in Vehicles, partially offset by declines in Dolls and Infant, Toddler, and Preschool.
The company reported a net loss of $18.2 million, compared to a $53.4 million profit a year ago, also impacted by lower interest income and a higher from discrete items.
Cash and equivalents fell to $523.9 million from $870.5 million a year ago, as the company continued share repurchases and paid down $600 million in Senior Notes in the prior year, while for the first half was a use of $202.1 million, an improvement from a use of $275.3 million a year earlier.
What changed
The Q1 2026 watch item for was whether the 44.9% level would improve as the company lapped tariff and FX headwinds. It did, rising 3.3 points sequentially to 48.2%, but remained 2.8 points below the prior-year quarter as tariff and inflation costs persisted.
North America , flagged for a potential stabilization after a 3% Q1 decline, instead fell 8% in Q2, suggesting retailer caution has not yet abated.
Barbie gross billings, watched for a floor after consecutive declines, continued to fall, contributing to an overall decline in the Dolls category, though the company did not provide a specific Q2 figure in the MD&A.
The material weakness in IT general controls, a multi-year watch item, was fully remediated as of the end of FY 2025, removing a long-standing risk from the narrative.
What to watch
Q3 2026 to see if the 48.2% level holds as the company cycles against the 50.0% margin in Q3 2025, when tariffs and cost inflation were already a significant drag.
North America in Q3 2026 to determine whether the 8% Q2 decline deepens or stabilizes as the company enters the critical holiday build period.
Advertising spend as a percentage of in Q3 2026 to gauge whether the 11.0% Q2 level, driven by and theatrical investments, represents a new run-rate or a one-quarter spike.
Progress toward the $225 million Optimizing for Profitable Growth savings target by year-end 2026, with $53 million in incremental savings still to be realized.
contracted 270 to 48.2%, pressured by 170 bps from incremental tariffs, 120 bps from cost inflation, and 110 bps from higher royalties, partially offset by a 120 bps benefit from .
swung from a $78.5M profit to $10.9M as advertising and promotion expenses jumped 320 to 11.0% of , reflecting investments in , theatrical releases, and brand marketing.
The company reported a net loss of $18.2M compared to a $53.4M profit a year ago, with the also impacted by lower interest income and a higher on discrete items.
Liquidity remained strong with $523.9M in cash and no borrowings under its $1.40B , though cash used for operating activities was $202.1M in the first half, an improvement from $275.3M a year earlier.
Management highlighted substantial uncertainty around U.S. trade policy, noting that while some tariff refunds were received, the ultimate impact of evolving tariffs and potential refunds could be material.
Quantitative and Qualitative Disclosures About Market Risk
Mattel faces foreign currency risk from the HKD and EUR, partially hedges with forwards up to 24 months, and estimates a 1% USD move impacts Q2 sales ~0.4%.
⌄
The Hong Kong dollar and Euro were the primary transaction exposure currencies in the first half of 2026.
Mattel uses foreign currency forward contracts up to 24 months to partially hedge purchase/sale of and intercompany transactions.
Unhedged intercompany gains/losses hit or other non-operating income based on the underlying transaction nature.
Hedged intercompany gains/losses are recorded when the inventory is sold to customers.
A 1% change in the U.S. dollar would have impacted Q2 2026 by approximately 0.4% and per share by less than $0.01.
Translation exposure for the six months ended June 30, 2026 came from a stronger USD against the EUR, IDR, and GBP, partially offset by a weaker USD against MXN and BRL.
The content of Part I, Item 1 "Financial Statements—Note 21 to the Consolidated Financial Statements—Contingencies" of this Quarterly Report on Form 10-Q is hereby incorporated by reference in its entirety in this Item 1.
⌄
The content of Part I, Item 1 "Financial Statements—Note 21 to the Consolidated Financial Statements—Contingencies" of this Quarterly Report on Form 10-Q is hereby incorporated by reference in its entirety in this Item 1.