Gloomy Barbie Sales Weigh on Mattel
Maybe it was her breakup with Ken around Valentine’s Day, but Barbie just can’t seem to get the spring back in her step.
Mattel Inc. reported Tuesday that dismal sales of the world-famous doll helped drive down the company’s first-quarter profit 73%.
The El Segundo company, which also makes Hot Wheels and Fisher-Price toys, reported net income of $9 million, or 2 cents a share, for the three-month period ended March 31. That was down from $32.8 million, or 7 cents, in the same period last year. Total sales climbed 5% to $780.9 million, helped by the weak dollar.
The results were below the expectations of analysts surveyed by Thomson First Call, which had projected earnings of 9 cents a share.
Sales of Barbie -- which accounted for a third of Mattel’s nearly $5 billion in revenue last year -- fell 15% domestically and 6% internationally. In 12 of the last 13 quarters, Barbie sales have declined or been flat.
“The first quarter of the year was not a good quarter,” Chief Executive Robert Eckert told investors and analysts during a conference call. “While I’m not pleased, I’m not surprised.”
Barbie’s widely publicized February breakup with Ken -- a male doll that has served as Barbie’s boyfriend for more than 40 years -- certainly didn’t boost sales of the plastic beauty.
Still, Barbie remains the world’s bestselling doll, though it has been losing market share to MGA Entertainment’s Bratz toys that appeal to older girls. Mindful of the Bratz competition, Eckert rolled out similar dolls -- called Flavas -- only to withdraw the line in last year’s fourth quarter after it failed to resonate with young consumers.
Since then, Eckert has outlined a new strategy that focuses on boosting Barbie sales, and Wall Street has greeted the plan with guarded optimism. On Tuesday, Mattel shares hit a 52-week low of $17.40 before closing down 32 cents at $18.33 on the New York Stock Exchange. Shares have lost 10% in the last year.
“It looks like things are going to get a little worse before they get better,” Piper Jaffray analyst Tony Gikas told Bloomberg News. “Investors need to be patient.”
Analysts at Oppenheimer & Co. reiterated their “buy” rating on Mattel’s stock, in part because of the company’s improved cash flow.
During the first quarter, Mattel began introducing the first of eight “story-driven” Barbies with loads of accessories and supported by DVDs and magazines, as well as a Cali Girl Barbie that sells for about $5, far less than other similar dolls.
Even when the new Barbie merchandise is fully rolled out, Eckert conceded Tuesday, sales might not rebound immediately.
“Realistically,” he told analysts, “I think we’ll make a lot of progress this year but it’s probably 2005 before we can draw the ultimate conclusion of the success” of the new Barbie products, he said.
Meanwhile Mattel’s other toy brands posted gains. Sales of Hot Wheels and other vehicles rose 1%; Fisher-Price’s were up 13%; and American Girl’s sales increased 17%.
It was the plunge in Barbie’s sales, particularly overseas, that was the “single biggest surprise” to John Taylor, a toy analyst with Portland, Ore.-based Arcadia Investment Corp.
Although sales have for several years been on the decline in the United States, “international was kind of the bright spot in the Barbie line,” he said.
“For the investment community, getting Barbie to stabilize and start moving is critical to Wall Street’s interest in Mattel,” Taylor said. “Barbie is one of the great brands in all of consumerland.”
During the conference call, Eckert also squelched speculation that he may leave Mattel for the top post at Coca-Cola Co. Coke’s current CEO, Doug Daft, has announced plans to leave by year’s end, and the Atlanta-based beverage giant has been conducting a high-profile search for his replacement.
Eckert discussed other measures he has taken to get Mattel back on track, including the elimination of 180 U.S. positions during the first quarter. Still, he noted that the company’s performance could be adversely affected later this year if toy retailer Toys R Us Corp. shutters low-performing stores as planned.
Barbie’s mood may brighten this summer when Mattel introduces Blaine, a boogie-board-riding Australian due to hit store shelves in June.
