What happened

Shares of Mattel (NASDAQ:MAT) were gaining today, in tandem with a rotation in the market that was favoring beaten-down cyclical stocks like the struggling toy maker and selling high-growth tech stocks that had recently hit all-time highs.

As a result, the stock was trading up 5.2% as of 2:06 p.m. EDT.

An "Explorer" Barbie doll with a tree and a desk

Image source: Mattel.

So what

There was no specific news out on Mattel today; however, the stock was gaining as investors respond to the economy reopening, with nonessential retailers opening their doors again and stay-at-home orders mostly coming to an end. As the toy maker, known for brands like Barbie, Fisher-Price and Hot Wheels, is mostly dependent and brick-and-mortar stores to sell its wares, the company has suffered during the shutdowns with sales falling 14% in the first quarter. 

Mattel was struggling before the pandemic hit, and the shutdowns will only make its turnaround attempt more difficult. Still, store reopenings and positive signs about vaccine developments should lift the stock and help its recovery.

Now what

In its earnings call earlier this month, management pointed to some signs of improvement as the economy begins to reopen. CEO Ynon Kreiz said that the company was seeing some supply chain improvements and early signs that demand was coming back, but getting product in customers' hands remained challenging.

There have also been some signs that toys and games have been in high demand with kids stuck at home due to stay-at-home orders and social distancing. NPD Group reported that toy sales rose 26% in the last week of March as Americans sought diversions in response to stay-at-home orders. 

That trend could favor Mattel as stores reopen, but the company still faces significant internal challenges with its cost structure and ability to grow that are separate from the novel coronavirus pandemic.

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