PARENTS continued to buy Mattel Inc’s action figures and Hot Wheels cars for their kids even though the toys got pricier, helping the company trump quarterly results estimates on Thursday.

Rival Hasbro Inc had also notched a robust second quarter, as demand for toys has so far withstood the decades-high inflation that has forced Americans to save their dollars for essentials like food and gas.

But surging costs of raw materials, freight and labour are starting to catch up to Mattel, pulling its adjusted margins to 45 per cent from last year’s 47.5 per cent.

In response, Mattel plans to continue raising prices and chief executive officer Ynon Kreiz said he was confident that toy sales would hold up even in a potential economic downturn, echoing comments from his counterpart at Hasbro.

Mattel’s net sales jumped 20 per cent to US$1.24 billion in the second quarter, surpassing analysts’ estimates of US$1.10 billion, according to Refinitiv IBES data. 

The overall gross billings for Hot Wheels toys rose 26 per cent in the quarter, while the unit that makes action figures recorded a 44 per cent jump, driven by demand for toys based on characters from the Lightyear and Jurassic World movies.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

However, chief finance officer Anthony DiSilvestro in an earnings call said the company is seeing some softness in higher-priced items such as the Barbie Dreamhouse. 

Shares of the California-based toymaker slipped about 1 per cent in extended trade, bruising this week’s 12 per cent gain. 

“We believe peak margins are behind MAT and are a bit worried about inventory levels up 44 per cent year on year,” said CFRA Research equity analyst Zachary Warring, but added that the company is in a much better place than before the pandemic.

Kreiz told Reuters the 44 per cent increase in Mattel’s inventories was needed to meet an expected increase in demand in the second half of the year. Excluding items, the company earned 18 cents per share, beating estimates of 6 cents. REUTERS