Shares of Mattel, Inc. (MAT) climbed 12.84% to $10.46 Friday afternoon in a possible market correction, an industry expert says, as the toy maker invests in its own products after relinquishing its DC characters license.
Richard Gottlieb, founder and CEO of Global Toy Experts, said when Mattel parted ways with DC, "the market for Mattel plunged." Mattel could have kept the DC license if it was "willing to bid high enough for it, but it relinquished it."
"That tells me they're investing in their own properties like Barbie and Hot Wheels because it's better to invest in what you own than what you rent," he said. "Movie licenses have been a struggle for toy companies because there are so many of them. And DC Comics, in particular, has struggled."
Gottlieb added that "there might have been an overreaction to the loss of DC."
Spin Master Corp. will be the new licensee for DC in the boy's action category, remote control and robotic vehicles, water toys and games and puzzles, displacing Mattel. The three-year global agreement with Warner Bros. begins in Spring of 2020.
"It's also possible that Mattel did better at Christmas than people anticipated," Gottlieb said.
He has analyzed the hot toy lists from Walmart Inc. (WMT) , Target Corporation (TGT) and J.C. Penney (JCP) and, based upon what he saw, Gottlieb said Mattel and Walmart are betting on a strong economy with higher retail price points.
In October, Mattel reported a 41% increase in operating income, which led to earnings of 18 cents a share on revenue of $1.44 billion. Analysts were expecting the company to report earnings of 20 cents a share on revenue of $1.49 billion.
Mattel also warned at the time that it expected its fourth quarter to be disrupted by the closure of toy retailer Toys "R" Us, leading to a decline in gross sales. However, the company did report a 6% increase in North American sales as it recaptured the top toy maker position in the U.S., according to market research company NPD Group.