Although demand for toys typically stays resilient during economic downturns, repeated price increases to combat rising costs of raw materials, freight and labor have started to weigh on toymakers such as Mattel and rival Hasbro Inc.

Mattel missed quarterly sales estimates for the first time since March 2020, while Hasbro earlier this month tempered its full-year revenue outlook and warned that demand was starting to slip ahead of the festive season.

Mattel, meanwhile, expects demand to accelerate during the crucial holiday shopping season, but said it would conduct more promotions to remain competitive.

"We are in the midst of a challenging macroeconomic environment, which equals volatility," Chief Executive Ynon Kreiz told Reuters.

Mattel reduced its 2022 adjusted profit forecast to between $1.32 and $1.42 per share from $1.42 to $1.48 earlier, but its raised prices helped the toymaker post adjusted gross margin of 48.3% in the third quarter, compared with last year's 47.8%.

Overall gross billings in the unit that makes Hot Wheels rose 12%, helping partly offset a 4% decline in the North America segment driven by declines in sales of Barbie dolls and action figures.

Net sales fell marginally to $1.76 billion in the third quarter ended Sept. 30, missing analysts' estimates of $1.78 billion, according to IBES data from Refinitiv.

The Fisher-Price toys maker reiterated its forecast for full-year sales.

(Reporting by Uday Sampath and Ananya Mariam Rajesh in Bengaluru; Editing by Devika Syamnath)

By Ananya Mariam Rajesh and Uday Sampath Kumar