As the holiday shopping season nears, toy giant Mattel says retailers are ramping up inventory levels to meet renewed consumer demand. Speaking during the company’s third-quarter 2025 earnings call on Tuesday (Oct. 21), Chairman and CEO Ynon Kreiz confirmed that retailers have begun stocking up toys and games earlier than expected, signaling confidence in the season’s sales outlook.
Despite headwinds from tariffs and changes in retail logistics models, Mattel expects strong top-line growth in Q4 and reaffirmed its full-year guidance.
“Looking into the balance of the year, we expect a good holiday season for Mattel, strong top-line growth in the fourth quarter, and are reiterating our full-year guidance,” said Kreiz.
Retailers Shift Logistics Models Amid Tariffs and Supply Uncertainty
Mattel’s Chief Financial Officer Paul Ruh explained that the company’s U.S. business faced temporary softness in the third quarter due to a shift in retailers’ ordering patterns.
Previously, retailers relied on a direct import model, in which they purchased inventory in source countries and handled their own importation and warehousing. This approach let retailers capture greater margins, but required bulk orders placed months in advance.
Now, many have adopted a domestic shipping model, taking ownership of inventory once it arrives in the destination country. This just-in-time purchasing strategy allows retailers to react faster to economic conditions, tariffs, and consumer trends.
| Model Type | Ownership Transfer | Order Timing | Margin Impact | Flexibility |
|---|---|---|---|---|
| Direct Import | At sourcing country | Early (2-3 months ahead) | Higher for retailer | Low |
| Domestic Shipping | At destination country (post-import) | Closer to retail season | Similar margin for Mattel | High |
“Given our scale and supply chain capabilities, the economics are similar for both direct import and domestic models,” Ruh said. “But for other players more geared to direct import, it can be a bigger challenge.”
This structural shift moved many retailer orders from the third quarter to the fourth, temporarily affecting reported revenue but strengthening Mattel’s Q4 pipeline.
Consumer Demand Trends: Retailers Betting on a Strong Season
Retailers’ renewed confidence comes from visible growth in point-of-sale (POS) demand, indicating that consumers are spending more on discretionary categories like toys and games despite tariff-related inflation.
“They see what we are seeing; they see an increase in POS,” said Ruh. “So, they want to be ready for the season and they’re stocking up their inventories to meet the expected consumer demand.”
Industry analysts note that this trend aligns with recent data from PYMNTS Intelligence, which found that holiday discretionary spending in 2025 is expected to grow 4.5% year-over-year, led by toys, apparel, and digital entertainment.
Mattel’s brand portfolio strength — including Barbie, Hot Wheels, and Fisher-Price — continues to drive retail traffic and digital engagement. The company’s ability to manage logistics domestically also gives it an advantage over smaller rivals facing higher import costs.
Mattel’s Strategic Shift: Beyond Toys to Entertainment and AI
While the company’s core toy segment remains strong, Mattel is diversifying its business model by expanding into digital gaming, live-action content, and artificial intelligence (AI).
Entertainment and Digital Media Pipeline
According to Mattel’s Q3 investor presentation, the company is developing:
- Two new live-action television series,
- One co-developed live-action movie, and
- Two self-published digital games launching in 2026.
These initiatives follow the success of the Barbie movie franchise, which contributed to a resurgence in Mattel’s intellectual property (IP) monetization strategy.
“We continue to grow our IP-driven toy business while expanding our entertainment capabilities,” Kreiz said. “Our focus is to turn Mattel into a high-performing, multi-platform entertainment company.”
AI-Powered Toys in Collaboration With OpenAI
One of the most intriguing announcements from Mattel’s third quarter is its strategic collaboration with OpenAI, which aims to embed generative AI capabilities into its toy products.
According to the company, AI will be used to enhance storytelling, personalize playtime, and improve interactive learning experiences for children.
“The partnership is taking shape,” Mattel said in its presentation, adding that the first AI-enabled prototypes are expected in 2026.
This initiative positions Mattel at the intersection of technology and play, potentially reshaping the future of the toy industry.
Industry Context: Hasbro’s Earnings and Competitive Landscape
Mattel’s positive outlook comes ahead of Hasbro’s third-quarter earnings release scheduled for Thursday (Oct. 23). Analysts expect Hasbro to report moderate growth driven by tabletop gaming and licensed entertainment products.
The two companies continue to compete for share in the $110 billion global toy market, but Mattel’s investments in digital media and AI may give it a long-term strategic edge.
| Company | 2025 Focus Areas | Growth Drivers | AI Integration |
|---|---|---|---|
| Mattel | Digital games, live-action content, AI toys | Retail restock, POS rebound, brand IP | Active partnership with OpenAI |
| Hasbro | Gaming and licensing | Wizards of the Coast, tabletop titles | Exploring generative content tools |
Economic and Trade Backdrop: Retailers Adjust to Tariffs
The tariff environment continues to shape global supply chains, with toy imports from China — still a dominant sourcing hub — facing cost pressures. By shifting to domestic logistics and delaying ownership transfer, retailers are mitigating these risks and maintaining flexibility.
Mattel’s global scale and diversified sourcing allow it to manage cost volatility more effectively than smaller players. The company’s strong balance sheet and domestic warehousing capabilities also provide resilience amid fluctuating trade conditions.
Why It Matters: A More Flexible, Data-Driven Toy Industry
Mattel’s Q3 performance highlights how agility and supply chain modernization are redefining success in retail. The company’s ability to pivot logistics models, maintain cost stability, and forecast demand in real time underscores how AI and analytics are now central to consumer goods operations.
Industry experts believe that as AI integration deepens, toy makers could benefit from personalized marketing, real-time sales prediction, and adaptive production models — all crucial for high-volume, seasonal sectors like toys.
“The toy industry is entering a new phase of digital convergence,” said Ethan Mallory, a retail analyst at Consumer Intelligence Group. “Mattel’s blend of physical play, AI innovation, and entertainment IP is exactly what the modern consumer expects.”
FAQs
Why did Mattel experience a slowdown in the third quarter?
The slowdown was due to retailers shifting from early, bulk direct-import orders to more flexible domestic purchasing, moving many Q3 orders into Q4.
How does the new logistics model help retailers?
The domestic shipping model lets retailers adjust inventory closer to demand, reducing risk from tariffs and consumer uncertainty.
What is Mattel’s forecast for the 2025 holiday season?
Mattel expects strong top-line growth in Q4 and has reaffirmed its full-year guidance, supported by rising POS sales and retailer restocking.
What role does AI play in Mattel’s future products?
Through its collaboration with OpenAI, Mattel plans to embed AI-driven interactivity into toys, offering more personalized and educational play experiences.
What other entertainment projects is Mattel developing?
Mattel is developing two live-action TV shows, a co-developed movie, and two self-published digital games, expected to launch in 2026.