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Mattel is shuttering one of its tier 1 supplier plants in China as it looks to diversify its production footprint, executives said in a Q1 earnings call. The company intends to discontinue production at that plant sometime this year, according to a 10-K filing.
Currently, 50% of Mattel’s products are made in China, and that percentage continues to decline, CEO Ynon Kreiz told analysts during the call.
“It's not so much about geopolitical risk as such, but more about diversifying our footprint and working in different countries and continue to optimize our footprint in terms of cost, fulfillment, services by different suppliers and part of our journey to continue to strengthen our supply chain, which is now a competitive advantage for us,” Kriez said.
Mattel has other principal manufacturing sites in Indonesia, Malaysia, Mexico and Thailand, according to the 10-K filing.
The closure is part of Mattel’s Optimizing for Profitable Growth Program initially announced in Q4 2023. The three-year program aims to achieve efficiencies and cost savings opportunities in the supply chain through a more diverse manufacturing footprint and optimized geographic sourcing efforts. In 2024, Mattel expects about $60 million in cost savings as a result of the program.
In Mattel’s Q1 earnings call, CFO Anthony DiSilvestro said that Mattel saw a significant gross margin expansion due to lower inventory management costs, cost deflation in ocean freight and savings from its growth program. He added that the company expects to continue benefiting from cost savings and from increased production levels.
The company behind Barbie dolls and Fisher-Price toys has been making efforts to diversify and shift its production footprint for a while. In 2021, Mattel began using dual source manufacturing for certain product lines and started relying more on nearshoring to prevent bottlenecks during peak season. That same year, the manufacture ceased operations at its Canada plant, according to the 10-K filing. Earlier in 2019, Mattel closed three plants in Mexico, China and Indonesia.
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Kelly Stroh, Khareem Sudlow
