Mattel CEO Addresses Tariffs and Manufacturing Strategies on CNBC’s “Squawk Box”
In a recent appearance on CNBC’s “Squawk Box”, Mattel CEO Ynon Kreiz expressed skepticism about the possibility of moving production to the United States due to President Trump’s tariffs on Chinese imports. “We don’t see that happening,” Kreiz stated, emphasizing that the company anticipates rising prices in the U.S. To navigate the complexities of the trade war, he outlined three primary strategies Mattel is implementing, including “pricing action.”
Mattel’s Financial Outlook Amid Economic Uncertainty
The discussion occurred just a day after Mattel retracted its annual financial forecast, attributing the decision to the “volatile macroeconomic environment and evolving U.S. tariff landscape.” According to its recent first-quarter earnings report, Mattel stated that predicting consumer spending and U.S. sales for the remainder of the year, especially during the holiday season, is challenging. The report also revealed that the company has raised its cost savings target from $60 million to $80 million, primarily through cutting down on promotions and discounts. Additionally, Mattel laid off over a hundred employees at its El Segundo, CA headquarters in late March as part of these cost-cutting measures.
Diversifying Supply Chains to Mitigate Tariff Impact
In addressing the challenges posed by tariffs, Kreiz highlighted the company’s focus on diversifying its global supply chain to lessen reliance on Chinese manufacturing. He asserted that within two years, no single country will contribute more than 25% of Mattel’s sourcing.
Beyond China, Mattel sources its popular products, including Barbies, Hot Wheels, and American Girl Dolls, from countries like Indonesia, Malaysia, and Thailand. These nations have also been implicated in reciprocal tariffs announced by the Trump administration earlier in April, although these tariffs have since been paused for 90 days.
Impact of Tariffs on the Toy Industry and Holiday Sales
Kreiz’s appearance on Squawk Box came shortly after President Trump commented on the potential effects of tariffs on the toy industry, where around 80% of global toy production is based in China. During a cabinet meeting, he remarked that children could receive “two dolls instead of 30 dolls” this Christmas, implying a shift in consumer expectations due to price increases. When asked about the risk to Christmas sales, Kreiz reassured that Mattel is committed to maintaining a steady supply of products across a “wide range of affordable price points.” According to analyst Eric Handler from Roth, Mattel aims for 40% to 50% of its products to remain priced under $20.
Advocacy for Tariff Exemptions in the Toy Industry
The Toy Association, advocating for the U.S. toy industry, has actively sought exemptions from Trump’s tariffs since they were announced. Kreiz voiced his support for the Association’s efforts, emphasizing the importance of toys in children’s lives.
Leadership and Future Directions at Mattel
Kreiz, who joined Mattel in 2018 from Maker Studios, a content creation company acquired by Disney, is recognized for steering the company through a successful turnaround. Under his leadership, the Barbie brand achieved its highest annual sales results in 2021.
Last week, during a cabinet meeting, President Trump speculated that “maybe the children will have two dolls instead of 30 dolls” this holiday season. He asserted that Americans would be willing to make sacrifices for what he perceives as a greater goal in the trade war. However, the specifics of that goal remain unclear, leaving many to speculate on the implications for holiday shopping as we approach Black Friday.
FAQ: Understanding Tariffs and Their Effects on Mattel
What are the impacts of tariffs on Mattel’s pricing strategy?
Tariffs have led Mattel to increase product prices and adjust their pricing strategy to mitigate costs related to imported goods.
How is Mattel diversifying its manufacturing locations?
Mattel is reducing its dependence on China by sourcing from other countries and aims to ensure that no single country will account for more than 25% of its supply chain.
Will Mattel’s holiday products remain affordable for consumers?
Yes, Mattel is committed to keeping a significant portion of its products priced below $20, ensuring accessibility for consumers during the holiday season.
Why is the Toy Association advocating for tariff exemptions?
The Toy Association represents the interests of the toy industry and believes that tariffs negatively impact consumer choice and accessibility, making it crucial to seek exemptions.
What were the results of Mattel’s first-quarter financial report?
Mattel withdrew its annual forecast due to economic uncertainties and increased its cost savings target, anticipating challenges in consumer spending.