Barbie and her teammates may get a chilly reception from holiday shoppers.
After suffering a rough year, toy maker Mattel Inc. is facing an uphill battle during the crucial gift-buying months of November and December.
The El Segundo company has reported four straight quarters of declining revenue. Its classic mainstays, such as the leggy fashion doll and the Fisher-Price line of infant and toddler playthings, are failing to hold the attention of children and their parents.
In September, Mattel lost its long-held title of world's biggest toy company. Danish rival Lego now claims that status.
Then, this week, the National Retail Federation said products spun from Walt Disney Co.'s blockbuster movie "Frozen" have unseated Barbie as the top holiday toy for girls, the first time the iconic doll was overtaken in the survey's 11-year history.
All of that suggests trouble ahead for Mattel, which has seen its share price tumble from a high of $47.82 at the end of last year to $30.88 on Wednesday. The company could see a repeat of last year, when its sales dropped 6% in the fourth quarter, analysts said.
"It's going to be a lean holiday season for these guys," said Gerrick Johnson, an analyst at BMO Capital Markets. "Just like last year, you don't have a lot of newness and fresh products."
Winning a spot on Hanukkah wish lists and real estate under the Christmas tree is vital to the $22-billion toy industry, with some companies pulling in 40% or more of their annual sales during the last two months of the year.
Observers say Mattel's No. 1 problem is a lack of innovation in a fast-moving industry in which companies thrive by churning out the next must-get doll or gadget.
Shoppers weren't impressed by some of Mattel's rehab attempts; a Barbie update with bells and whistles such as touch-screen technology and the reintroduction of its Max Steel line of action figures weren't big hits.
The creative drought also coincided with a down cycle in some of Mattel's core brands. In the quarter that ended Sept. 30, Barbie sales plunged 21%, while Fisher-Price dropped 16%. One bright spot is American Girl, which reported a sales decline in the third quarter but otherwise has been on a growth spurt.
"Fisher-Price has been weak for years, Barbie has been weak for a couple of years, Monster High turned south this year," said Sean McGowan, managing director of equity research at Needham & Co. Huge brands "are great when things are going up, and it works against you when they are going down."
The toy company also suffered a blow when it lost the doll licenses to Disney's hit "Frozen" and Princess properties. Rival Hasbro won the licenses starting in 2016.
Merchandise sales from Disney's princesses, especially related to the film "Frozen," bring in more than $300 million a year for Mattel, analysts said. That will soon leave a big hole to fill in its lineup, and Mattel cedes some ground to Hasbro, a traditionally boy-focused toy company that has been steadily expanding its girls business.
"From a competitive standpoint, this was Hasbro's punch right in the gut to Mattel," said Stephanie Wissink, an analyst at Piper Jaffray & Co. "That's a pretty big thing for their legacy as the predominant fashion doll manufacturer and brand builder."
Mattel has been working hard to get the company back on track.
At its annual analyst day in October, the company unveiled a number of turnaround efforts. Chief among them: investing more in design and marketing, and slashing $250 million to $300 million in costs by 2016. Areas of focus include squeezing expenses from manufacturing and being smarter about advertising spending.
Mattel Chief Executive Bryan Stockton acknowledged in an interview that the company needed a strategic revamp. But he says he's optimistic about the holiday season and beyond.
"This is a challenging business," he said. "It changes so much, and because of rapid change, you can have a season that's not what you would like. What we want to do is try to make sure we don't go through that again."
Mattel stumbled in 2013 by spending too much money on areas such as advertising before the holidays started, Stockton said. This year, more money has been shifted into the fourth quarter, and more research has been conducted on good ways to capture shopper interest and dollars.
"What we have been focusing on all year is how do we transform the company into something that's more nimble?" he said. "How do we transform the company into something that's more consumer-centric?"
A key factor is investing more in the creative process, Stockton said. The company brought back Mattel alumnus Richard Dickson, who oversaw Barbie's last surge of popularity around 2010. More money will be devoted to designing toys, which could include hiring more designers or investing in new technologies.
Analyst said Mattel's efforts are promising for its future but could be too late to save this holiday.
McGowan said the company is competing not only with other toy makers but also smartphone and tablet computer manufacturers because tech-savvy youngsters are asking for those devices instead of gaming boards and dolls.
"The backdrop is electronics gnawing away at time and money for kids," he said. "The fact is fun-related things for kids have not gone down but spending is being diverted to other things."
Mattel's performance this holiday season will also affect future Christmases and Hanukkahs, Wissink said. Retailers making their orders for the year look to previous seasons for guidance.
If the toy maker can deliver a solid holiday season, buyers will have more confidence next year and the company "can chip away at their loss," she said.
"For Mattel, the next two years are dictated by the next two months," she said.