By Mark Seavy 

Toymakers are preparing for slower demand during the holidays as higher costs increase retail prices and consumer spending tightens.  

The clearest sign was last week when Mattel slashed its annual profit and sales forecasts, with the latter being lowered to a 1-3% increase (down from the 3-6% gain forecasted in Q2). The toymaker experienced a late third quarter “deceleration in sales” that is expected to carry for the balance of the year, CEO Roger Lynch said.  

“We’ve seen it continue into the fourth quarter with similar trends across each of the major markets,” Lynch said.  

The cost of raw materials, including resins and plastics, has risen amid global conflict, forcing toymakers to increase wholesale prices, which has led to consumers paying more at retail. While a year ago tariffs were the major culprit for higher prices, they have since been joined by increased costs for raw materials, shipping, and gas/diesel. 

Prices remain “far from stable,” with tariffs alone adding 10% to costs in addition to higher costs related to fuel, transportation, memory chips for electronic toys, and wages in the U.S. and China, said Basic Fun CEO Jay Foreman, whose company has licenses for Care Bears, Tonka, Dungeons & Dragons, Fisher-Price, and others. Indeed, retail prices for toys increased 8.3% in the U.S. between February and September.   

Collectibles supplier Noble Collection, which relies heavily on resin for its licensed chess sets, boosted wholesale prices by up to 10% after previously holding the line on increases, President Julian Montoya said.  

“We hadn’t taken a price increase in a long time and had been taking smaller margins on our side,” Montoya said. “And if you are increasing the prices, you must make sure you are not compromising on quality and value. A price increase was unavoidable with everything that is going on and the uncertainty around tariffs. There is no indication, at least for the next two years, that these tariffs are going away no matter what happens. We just need to wait.”  

And while former Mattel executives said in July that retail orders had “stabilized at current levels,” new CFO Peter Griffith said last week retailers are buying products “closer to the sale” of them. At the same time, Mattel executives also forecasted in July that Barbie sales would improve as the year wore on, but the business has declined and the toymaker needs “compelling products and content and cultural moments,” Lynch said.  

“Tariffs continue to be a very fluid topic and one that we don’t have full visibility on,” Spin Master CFO Jonathan Roiter said. “This year we have full visibility on what our costs look like as we head into the end of the year. The good news is that we have known about $100 [per barrel] brent oil since last April, so we have been putting the final touches on what we were showing our retailers in late August. The mix and construction, and the products themselves, were all based on that assumption. We have tried to design products to create the right mix to offset the increased cost in our supply chain” while keeping 50% of Spin Master products priced below $20.  

Another shift in strategy is that many toy companies are narrowing their focus in order to expand key brands across multiple categories, growing from core toys to reach live events, gaming, location-based entertainment, films, and streaming series.  

Mattel, for example, has put marketing behind Hot Wheels. The brand aired the Hot Wheels Let’s Race, Attack of the T-Rex special on Netflix on October 20, while also shipping Hot Wheels Ultimate Garage products to retail. Hasbro, meanwhile, has broadened its Magic the Gathering franchise via licensed deals with Marvel, Lord of the Rings, and The Hobbit, while also preparing for the release of its first internally developed mobile game, Exodus, on April 7. And Spin Master struck a licensing deal with retailer Minioso to bring characters from its Toca Boca app (including Paper Bag Cat, Nora, and Silly Burger) into plush and backpack charms while also developing its new Hellbreak horror trading card game under a Paramount Pictures license.  

“We have a strong core toy business, we can build broader franchise ecosystems around the brands and reach consumers across all these multiple touchpoints, including digital, but also content, live experiences, consumer products, and just other expressions of our IP,” said Lynch, whose company bought out its Mattel163 digital games developer from joint venture partner Netease earlier this year after it had developed titles under the Uno brand.