Mattel Outlines Plan to Boost Weak Barbie Sales
Coming off one of the worst performances ever of the company’s vaunted Barbie brand, Mattel Inc. Chairman Robert Eckert on Tuesday outlined a new strategy to reinvigorate sales of the world’s bestselling doll.
Eckert, during a conference call with Wall Street analysts before the stock markets opened, said Mattel would launch eight new Barbie story lines with dolls and accessories designed to appeal to different age groups.
The new offerings, which will be unveiled at the annual American International Toy Fair this month in New York, involve story-driven themes for the dolls that will be supported by DVDs and magazines. The approach is a marked departure from what Eckert called “one-off” Barbies.
“ ‘Cheerleader Barbie’ or ‘Barbie’s Got a New Plaid Outfit’ or ‘Barbie Likes Jell-O’ -- those things didn’t work,” Eckert said.
Indeed, sales of Barbie -- which account for about one-third of Mattel’s nearly $5 billion in annual sales -- slumped 25% in the United States in the fourth quarter.
The downturn was disclosed in the company’s fourth-quarter earnings report, which showed a 15% profit gain, to $213.9 million, or 49 cents a share, from $186.1 million, or 42 cents, a year earlier.
Analysts were heartened by Eckert’s comments about the new Barbie products, and Mattel shares rose 2.9%, or 55 cents, to $19.50 on the New York Stock Exchange.
After the conference call, Piper Jaffray & Co. upgraded its Mattel rating to “outperform,” saying that Barbie probably had seen the “near-term bottom” and that “management’s laser focus on sales growth has a high likelihood of playing out.”
Linda Bolton Weiser of Oppenheimer & Co. in New York said she “felt a little more encouraged” that Eckert could point to concrete things Mattel was doing to improve the sales growth.
“Last year, I felt they were just really struggling and grasping at sales to hang in there, without a well-thought-out strategy,” said Bolton Weiser, who has a “buy” rating on Mattel.
Acknowledging one of last year’s mistakes, Eckert also said the company would discontinue Flavas, its much-publicized urban-themed dolls that sported tattoos and skimpy clothes and came in boxes designed to look like graffiti-covered brick walls.
That attempt to reach older girls, many of whom gravitated to Bratz dolls, made by West Hills-based MGA Entertainment Inc., was seen as a poor attempt to mimic Bratz, and one that failed to resonate with girls.
In its fourth-quarter earnings report, Mattel said sales overseas were the company’s saving grace at Christmas as price wars, tough competition and consumers’ late holiday shopping depressed sales in the U.S.
In the three months ended Dec. 31, the El Segundo-based maker of Barbie, Fisher-Price and Hot Wheels toys said Barbie sales worldwide slumped 5%.
Strong sales of Hot Wheels, which grew 22% worldwide, and Fisher-Price toys, which rose 16%, helped offset poor performance from the girls and entertainment areas.
Total sales rose 4%, to $1.74 billion, but the gains were spurred by the weak U.S. dollar. Sales in the U.S. fell 5% in the quarter, while international sales grew 17%. Without the currency exchange benefit, sales would have been flat, analysts said.
“The quarter looked as if they scraped by,” said Bolton Weiser, noting that the currency exchange and a tax advantage contributed to the company’s ability to meet Wall Street expectations. “The quality of the earnings was not super-duper great.”
For the full year, Mattel earned $537.6 million, or $1.23 a share. That was a gain from $230.1 million, or 52 cents, the year before, which included a $252-million charge to reflect a cumulative change in accounting principles.
Not including the charge, Mattel’s 2003 profits were up 12% from a year earlier. Sales for the year rose to $4.96 billion, up almost 2% from $4.89 billion a year earlier.
The 2003 performance increases the pressure on Mattel for the coming year, analysts said.
