Mattel Attempts to Streamline as Profit Sinks : First-Quarter Earnings Are Only $18,000; Firm Says More Layoffs Possible
The new chairman of troubled Mattel Toys said Thursday a major effort is under way to streamline the company, slash costs and make it more responsive to the changing tastes of children.
More layoffs are possible at the company’s headquarters in Hawthorne, where 150 managers were laid off last March, said John W. Amerman, chairman and chief executive of the company that makes Barbie dolls and Masters of the Universe.
Meanwhile, the company reported lower first-quarter profit on Thursday, which industry sources attributed to weak sales of the Marshall Bravestarr toy. Mattel earned $18,000 in the first quarter, compared to $242,000 in the first quarter a year ago.
Despite Mattel’s weak performance, Amerman predicted that 1987 would be a good year for the company. It lost $1 million last year, even though its top selling toy, Barbie, had its best year ever. The company attributed the 1986 loss to a $250-million drop in sales of two key product lines--Masters of the Universe and Rainbow Brite dolls.
The chairman said the company’s experience with Masters of the Universe shows a need to be more responsive to the fickle tastes of children. He said the company didn’t react quickly enough to a drop in the toy’s popularity in 1985. “Children’s tastes have a way of changing very rapidly,” he said. “We have to react to that better than (we have) in the past.”
Amerman said the company has received good response for several of its new toys, including talking Baby Heather dolls; Lady Lovely Locks, a doll with clip-on tresses, and Captain Power, which will be the star of a cartoon show this fall.
The Captain Power toy set includes a starship that shoots light beams at a television screen; cartoon figures will appear to shoot back. Action for Children’s Television, an advocacy group, has asked the Federal Communications Commission to block the show, Mattel officials said.
Mattel President Thomas J. Kalinske said the company has domestic toy orders worth $500 million, but he cautioned that the orders could be canceled before delivery later this year.
Amerman said domestic sales of Marshall Bravestarr in the first quarter were below expectations but that he thinks sales will increase after a cartoon show starring the laser-shooting cowboy appears on television this fall. “We have great hope for the toy,” he said.
Much of the reorganization effort is aimed at Mattel’s troubled domestic operations, which employ 3,000, he said. The company is looking for ways to reduce domestic costs by shifting various functions from headquarters to overseas, Amerman said. He said the company can shield domestic income from taxes with $175 million in tax-loss carryforwards.
In addition, Amerman said, Mattel has hired the consulting firm of McKinsey & Co. to review operations. He said the review will be finished within 45 days.
Amerman said another focus of the review is the company’s high selling and administration costs. Those costs account for about 22% Mattel’s sales. Harold Vogel, a toy industry analyst with Merrill Lynch in New York, said those costs should be around 16% to 17%.