By Savyata Mishra

(Reuters) -Toymaker Mattel on Tuesday forecast full-year profit above Wall Street expectations as the Barbie maker warned of potential price hikes owing to recent tariffs by President Donald Trump, with shares surging nearly 8% after the bell.

The move comes as Trump imposed sweeping tariffs on China, Mexico and Canada on Saturday, which Mattel aims to mitigate through supply chain optimization and potential price increases on its toys.

When it comes to pricing, the company will work with its retail partners to find the right balance of quality and value at affordable price points, CEO Ynon Kreiz said.

Levies on Mexico and Canada were paused for a month while tariffs were being imposed on China, which retaliated with levies of its own.

Currently, less than 40% of Mattel's global product is manufactured in China, compared to an industry average of about 80%.

The toy industry has witnessed muted demand through 2024 as cash-strapped customers pulled back on discretionary purchases, while higher product prices further discouraged spending.

However, Mattel beat fourth-quarter estimates owing to stable demand for its Uno cards and Hot Wheels vehicles as well as cost-saving efforts.

"I believe ... (there is) strength in Mattel's 2025 product lineup as higher prices could stifle some demand - families are already maxed out - but great products can offset those declines," said James Zahn, editor in chief at The Toy Book magazine.

Mattel undertook stringent cost-control measures to protect its margins from sluggish demand last year, and on Tuesday said it plans to repurchase $600 million of shares through 2025.

It expects 2025 adjusted profit per share in the range of $1.66 to $1.72, above analysts' average estimate of $1.58, according to data compiled by LSEG.

Net sales growth is forecast to grow in the range of 2% to 3%, slightly below analysts' expectations of a 2.7% rise to $5.51 billion.

The company's net sales rose 2% to $1.65 billion. Analysts on average had expected flat sales of $1.63 billion.

It earned 35 cents per share on an adjusted basis, beating estimates of 20 cents.