Eric Handler: I wonder if you could talk a little bit about your movie expectation Obviously, a huge success with Barbie. And I imagine that makes it easier to greenlight some additional films. Obviously, Hollywood is closed right now because of the strikes. But do you get — should we be thinking about maybe it could be sooner than later before we see the next Mattel-branded movies coming out? Or how should we think about that?
Ynon Kreiz: Yes, Eric, the vision from the outset was to collaborate with leading filmmakers, to make standout quality movies based on our iconic brands that will resonate in culture and appeal to global audiences. And I think it’s safe to say that we achieve that with this movie. And there is no question that the success of Barbie, reposition Mattel is an important player in Hollywood. The strength of our brands and cultural resonance of our franchises is an important factor playing outside of the Toy Island appealing to very broad audiences. We demonstrated our ability to attract, collaborate partner and amplify top creative talent. And the other dimension that people didn’t really fully appreciate. And frankly, we also, to some degree, we’re not fully recognized until it actually happened is our marketing capability outside of the toy eye.
We’re a company — we are a creative company. We’re an innovative company but we are also experts in demand creation. And we generate year in and year out, billions worth of demand to our product from the stock. Yet here what we did. We leverage our capabilities and our retail reach and expertise to promote and market the movie together with Warner Brothers, who did an excellent job but we truly amplify that and turn it into a cultural phenomenon. So those assets, relationships and capabilities make us an attractive player. And we believe that the success of the Barbie all of those reasons will accelerate our strategy and not just in movies but in other verticals given the strength of our brands and the fact that they resonate so strongly in culture.
So we’re very excited to be where we are. Clearly, it was a breakthrough quarter for our entertainment strategy and we expect that it will help us accelerate things in the coming quarters.
Operator: Your next question is from the line of Chris Horvers with JPMorgan.
Chris Horvers: So my question is, in the gross margin, there was 170 bps related to the Barbie movie. Can you talk about how — what that broke down in terms of box office participation versus the toy sales in the merchandise third-party merchandise? And how are you thinking about that benefit in the fourth quarter?
Anthony DiSilvestro: Sure. We’re not going to break it down to that level but let me comment on the impact. So within our gross margin bridge you saw a 170 basis point mix benefit. That’s not all Barbie related but it’s primarily related to our direct movie participation, movie-related toy sales and consumer products, all kind of bundled together. Also, what we did say is for the full year, we expect those 3 items to deliver more than $125 million in sales with a blended operating income margin of over 60%. And the majority of all that was recognized in Q3 and probably with a skew more towards the movie relative to the other items.
Chris Horvers: So as we think about the fourth quarter, how are you thinking about the sort of specific Barbie movie lift in terms of the top line and margin perspective, the participation point goes down but are you largely sold through directly toys directly related to the movie? And would you expect the merchandise portion to accelerate?
Anthony DiSilvestro: Yes. I would say less margin accretion related to these items in Q4 than Q3.
Operator: Your last question today comes from the line of Jason Haas with Bank of America.
Jason Haas: I’m curious if you could help size up how much of a headwind destocking was to revenue in the first half of the year? The reason I ask is just because as we’re thinking through our models for next year, is there an embedded uplift to revenue just because you’ll be lapping over that destocking? Or is it the case that the reason there was that destocking was because there was a restocking in the first half of 2022. So it was really more of a return to normal. Trying to figure out if there’s like an embedded revenue upside and what that could stay be for next year?
Anthony DiSilvestro: It’s very difficult to say in sort of the impact in 2024. But you’re right, in the first half of 2023, we saw for most of the inventory correction happened at retail. And in the context of our full year guidance, it’s 3 to 4 points of headwind. Again, most of that occurred in the first half of 2023. And depending on what retailers do going into 2024, again, sitting here today, right? It’s hard to say that there will be a bounce back relative to that destocking.
Jason Haas: Got it. That’s helpful. And then when I look at Barbie in the first half of the year for worldwide gross billings, excluding, FX it’s down a little over 20% or so in the first half of the year. And then we saw in 3Q, it went up 14% in the quarter. Is it fair to assume that a lot of that acceleration was driven by the Barbie movie I’m trying to understand if the Barbie movie did drive that halo effect to all Barbie toys, not just the movie-related SKUs. The concern being there that you may have to lap that next year since you don’t have another major motion pressure for Barbie. But I’m curious, I don’t know if there were promotions that shifted or other things to consider and maybe it just wasn’t all the movie.
Anthony DiSilvestro: Yes. I think the way to think about Q3 and Barbie, first, in terms of the 14% increase in gross billings, I would say that’s primarily attributable to the movie related items. But when you think about POS which is up low double digits as well, right? That’s primarily driven by the improvement in consumer demand around toys. And as we think about the impact of a movie, we believe it’s going to have a long-lasting effect in terms of broadening Barbie’s fan base, right? And that will be an important contributor to the brand. It’s really part of our long-term franchise management strategy. And with respect to 2023 in aggregate, right, we expect Barbie to grow in Q4 and for it to be positive on a full year basis which is part of the guidance that we updated today as well.
Operator: This concludes our question-and-answer portion for today. I turn the call back to Ynon Kreiz, Chairman and CEO.
Ynon Kreiz: Thank you, operator and thank you, everyone, for your questions. I would like to conclude the call by expressing our hope for the safety of Israeli and thalassemia and children, children and families caught in the Israel Hamas war. Since the attacks of October 7, the Mattel Children’s Foundation has been focused on humanitarian work, including cash and toy donations to shelters and hospitals to support children who are suffering. On a personal note, I would like also to thank all of those who have reached out to me directly to express their concern and condolences. We wish for a swift resolution to the war and more peaceful times in the future. And now, I’ll turn the call back to Dave.
David Zbojniewicz: Thank you, Ynon. The replay of this call will be available via webcast beginning at 8:30 p.m. Eastern Time today. The webcast link can be found in the Events and Presentations section of our Investors section of our corporate website. corporate.mattel.com. Thank you for participating in today’s call.
Operator: This concludes today’s conference call. You may now disconnect.
