Anthony DiSilvestro: Yes, it’s pretty much dependent on the timing of the collections related to the upside around the Barbie movie and it’s hard to say exactly when that’s going to come through. So that’s the reason that we didn’t change that.
Operator: Your next question comes from the line of James Hardiman with Citi.
James Hardiman: So if I think about sort of the implied fourth quarter guidance in that — on the revenue side in that mid- to high teens, is there any way to think about what the growth in POS needs to be to allow for that reported number in the fourth quarter?
Anthony DiSilvestro: Yes. We haven’t broken down to that level but we had said that we expect growth in consumer demand in the fourth quarter for Mattel. We expect to outpace the industry. But we do expect gross billings to be ahead of and that’s because we’re wrapping that retail inventory decline in the prior year. But we’re expecting a strong fourth quarter with respect to consumer demand or POS.
James Hardiman: Got it. That makes sense. And it sort of leads to my next question. Obviously, we haven’t even gotten to the holiday season. So a lot of the 2024 color is way too early. But if I just think about 2023 right? It was a tale of 2 half. First half, there was a lot of inventory drawdown. And so you were — your sales levels were way worse than POS. Second half is really about Barbie and the benefit that you’re getting there. Is there any way to compare those 2 effects as we think about lapping them? I think the big concern is that as you get to $125 million of headwind that it’s going to be real hard to lap that for the year but just trying to make sure I understand the moving pieces?
Anthony DiSilvestro: Sure. A couple of points there. I would say that the year is kind of unfolding as we expected and we did expect 2023 to revert to normal shipping patterns. 1/3 in the first half, 2/3 in the second half. That is what we’re seeing and that led to declines in the first half growth in the second half with accelerated growth in Q4, given what we’re wrapping. In terms of the bar movie and economic, look, we expect this to be a catalyst for the brand to benefit the franchise for quarters and years to come. So we don’t necessarily view it as, hey, something we’re just going to wrap, so to speak.
Operator: Your next question comes from the line of Linda Bolton-Weiser with D.A. Davidson.
Linda Bolton-Weiser: Yes, I was wondering if you could update us on your earlier comment about your theory that consumers were not as strong in their buying behaviors maybe in the summer because they were saving up in order to spend more for Christmas. Can you update us on? Do you have any survey work or anything that, update us on how consumers might more recently be thinking about things?
Anthony DiSilvestro: Yes. We don’t have any new survey week to point to but I would say things are unfolding as we had expected. Q4 to date, POS is positive for us. And we continue to expect that consumers will revert back to more historical shopping patterns and make their purchases closer to the holiday season. And with that, we would expect POS to accelerate as we progress through the fourth quarter.
Linda Bolton-Weiser: Okay. And I was also wondering if you could say whether or not you looked at the Melissa and Doug company that was sold. Did you consider looking at that or why or why not?
Anthony DiSilvestro: Yes. I would say, look, we don’t really comment on a competitor M&A. We are very focused on executing our capital deployment priorities which we’ve talked about in terms of investing to drive organic growth, maintaining that leverage ratio of 2x to 2.5x and our investment-grade rating and that gives us flexibility to consider M&A as well as share buyback. We’re very happy with our position in the ITPS category. We are a leader and the number one toy company globally. And the surprise is the number one property in the category. So we love our position and the prospects for our business.
Operator: Your next question comes from the line of Drew Crum with Stifel.
Drew Crum: Okay. Anthony, on adjusted gross margin, any notable swing factors to consider for 4Q? And just want to confirm that 4Q gross margin should decline quarter-on-quarter versus 3Q?.
Anthony DiSilvestro: Yes. In terms of commenting relative to the prior year as we think about fourth quarter and when you do the math, it implies pretty significant gross margin expansion in Q4 versus 2022 and there a couple of reasons for that. One is the prior year was about 43% and it was negatively impacted from concern significant inventory management costs. So we’re wrapping that. And as I think about the current year, we’ll benefit from scale from our Optimize and for Growth program as well as cost deflation. We did see some deflation in Q3 and would expect to see additional deflation in Q4. So that gives us confidence in terms of getting to that implied fourth quarter gross margin which is more in line with the historical levels as well.
Drew Crum: Got it. Okay. And then just to circle back to the toy industry and your outlook now down mid-single digits for the year. I think previously, you were assuming down slightly. Is this adjustment based on a weaker 3Q relative to your expectations? Is it something you’re anticipating for 4Q or a combination of the 2? And did I hear you correctly, Anthony, that you expect POS to accelerate in 4Q over 3Q? I just want to clarify that.
Anthony DiSilvestro: Let me clarify that quickly. So what I said is fourth quarter to date POS is positive. And from that level, we expect to accelerate. It wasn’t relative to 3Q.
Ynon Kreiz: Yes. And Drew, what we’re seeing is year-to-date decline that was more than we expected at the start of the year. We believe it’s primarily driven by macroeconomic factors inflation, higher interest rates and other elements that we all know and read about an experience. We believe consumers are returning to normalized shopping panels closer to the holiday season. So we expect to see some of that playing out in the fourth quarter. We believe that the industry and our retail partners are well prepared for the holiday season. But that said, we now expect, given the performance to date, the industry to be down mid-single digits.
Operator: Your next question comes from the line of Eric Handler with ROTH MKM.
