By Connor Hart

Mattel's anticipated sales surge in the weeks leading up to Christmas never materialized, prompting the toy maker to step up discounts ahead of the holidays that cratered margins.

That result during the critical lead up to Christmas led the maker of Barbie dolls and Hot Wheels cars to post sales and profit below Wall Street expectations in the fourth-quarter.

The quarter started off promising, Mattel said, with sales picking up quickly in the initial weeks, following a slowdown in the third quarter as retailers managed inventory cautiously amid macroeconomic and trade uncertainty.

But the late-year shift in orders meant Mattel couldn't fully make up the shortfall from the third quarter.

"December is historically the biggest month of the year," Chief Executive Ynon Kreiz said in an interview Tuesday. "But because of the shift in retailer ordering patterns, orders were even more back-end loaded."

Fourth-quarter sales rose 7% to $1.77 billion, below the $1.84 billion Wall Street had modeled. Profit and gross margins fell sharply due to increased discounts, as well as other items such as tariff costs.

Mattel also issued guidance for the current year below expectation, as the company plans additional investments intended to stoke sales.

Kreiz noted that December sales only missed expectations in the U.S., and that the company performed as expected and gained market share internationally.

The promotional environment in December was steeper than expected, requiring Mattel to lean more heavily into discounts than originally planned. The company raised prices last summer in response to tariffs, and Kreiz said it continues to take a "very strategic" approach to pricing to drive demand and "offer the right quality and value for consumers."

Kreiz added that these promotional and pricing moves helped Mattel better manage inventory and position the company for a stronger start to 2026.

Looking ahead, Mattel said 2026 will be a pivotal year for its push beyond traditional toys and into entertainment and digital content. The company plans to release two movies--"Masters of the Universe" in June and "Matchbox: The Movie" in October--and expand its mobile gaming business after full ownership of the Mattel163 mobile-games studio, which it previously operated as a joint venture with NetEase.

Mattel said it plans to invest roughly $110 million in 2026 to expand capabilities and technologies in areas including digital games, artificial intelligence, direct-to-consumer and toy innovation, including quickly growing categories such as trading cards and adult collectors.

The company is also allocating $40 million to digital performance marketing to drive user acquisition for its mobile games. Kreiz said that, while these investments may slightly temper short-term earnings, they are designed to accelerate long-term growth.

For the year, Mattel guided for adjusted earnings of $1.18 to $1.30 a share for the year, below analyst views for $1.77 a share. The company forecast sales to climb 3% to 6% on a constant currency basis.

For its three-months ended Dec. 31, Mattel posted a profit of $106.2 million, or 34 cents a share, compared with $140.9 million, or 42 cents a share, a year earlier.

Stripping out certain one-time items, earnings were 39 cents a share. Analysts polled by FactSet expected adjusted earnings of 54 cents a share.

Among Mattel's main brands, Barbie posted a 2% gain in gross billings, which measures sales to retailers before adjustments. Fisher-Price's gross bookings ticked up 1%, while Hot Wheels' jumped 20%.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

February 10, 2026 16:16 ET (21:16 GMT)

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