Aging Barbie wants to freshen up
Amid much fanfare, 48-year-old Barbie this month will get a new attitude.
For nearly a decade, the pressure has been on Mattel Inc. to revise, redesign and re-engineer the ol’ girl and the rest of the company built around those tiny, made-for-high-heels feet.
Over the years, the company has tried dozens of small changes and a few big ones. There was the reduction in bust size, a gritty new urban look with a reduction in skirt length, and, of course, there was the big breakup with longtime paramour Ken.
On April 26, the world’s largest toy maker will unveil Barbie Girls, its first big new Barbie concept in four years. The company is quick to point out that this is just a new product and not a wholesale reinvention of the Barbie line.
“I think as a business there are things we can do to rebuild and help grow the doll business,” said Chief Executive Robert Eckert, brought in 2001 to boost Mattel’s flagging fortunes.
“We’re going to be announcing some new things within the next couple of weeks that I think will add some excitement to the doll business,” he told financial analysts Monday. “But I think we’ll wait a couple of weeks for that.”
Whatever happens, it doesn’t seem likely to be either the key to overwhelming success for El Segundo-based Mattel or a nail in the coffin, financial analysts say. And that’s the way they like it. After all, Mattel’s stock has surged 72% in the last 12 months without a dramatically new Barbie product.
Details of the long-awaited Barbie Girls, which will be introduced in New York, have been kept under tight wraps. The company has said only that the toy blends fashion doll play, the Internet and music.
Barbie is still the nation’s No. 1 fashion doll. But the brand has suffered at the hands of the edgier, pouty-lipped Bratz dolls from MGA Entertainment Inc.
Last year, Barbie seemed poised for new success, with four consecutive quarters of modest domestic sales growth and the first annual sales gain since 2003.
But on Monday, the toy maker said sales of Barbie and related products in the United States fell 21% in the first three months of the year.
Even so, the doll and related products -- the company’s biggest line -- posted a 2% gain overall because international sales grew 20%, Mattel said.
Although sales of Barbie faltered, Wall Street hardly blinked.
Sales of toys from the movie “Cars” and the latest Tickle Me Elmo doll helped drive sales across the company up 10%, its biggest quarterly gain in eight years.
The company’s profit fell 60% in the first quarter to $12 million because of a large one-time gain last year from a foreign tax settlement, Mattel said.
The first quarter also is considered the least important for toy companies, whose business is weighted toward the holiday season. Mattel stock fell 24 cents Monday to $28.10.
“It’s a really good quarter from an earnings and sales perspective,” said Gerrick Johnson, an analyst with BMO Capital Markets in New York.
“A 21% domestic decline for Barbie is a big deal; it’s shocking. Internationally Barbie was up 20% and that is shocking too,” he added. “It just goes to show how in the first quarter, everything can get distorted because it is a seasonally slow period.”
Analysts are now gauging the new Barbie product’s potential.
“If this thing hits way above average, it could be a big deal, and the margin on this kind of revenue source could be enormous,” said Sean McGowan, an analyst with Wedbush Morgan Securities in New York.
“If it’s a complete miss, it’s a negative surprise. But like everything else that they’re trying, there’s a reasonable middle ground between success and failure that won’t really affect them one way or another.”
Mattel’s stock price is far off the heady days of the late 1990s, when sales of Barbie soared to nearly $2 billion and shares in June 1998 hit $43.11. Although the company no longer provides Barbie sales figures, it has since then reported almost continuous declines.
But today’s share price is also far removed from the dark days of 2000, when the stock plummeted to just more than $10 as cracks began appearing in Barbie’s dominance and the company reeled from the disastrous, $3.6-billion acquisition of software maker Learning Co.
Part of Mattel’s success on Wall Street over the last year is because of growth in the $22-billion toy industry as a whole after several years of flat sales.
But analysts were quick to note Monday that Mattel had challenges ahead, in part as a result of its 2006 success.
In a note to clients, Linda Bolton Weiser of Oppenheimer & Co. in New York maintained a neutral rating on the company’s stock, citing a “lack of entertainment properties [and] a competitor’s Bratz movie.”
Mattel’s 2007 entertainment products are not expected to match last year’s runaway hit with “Cars.” The company’s biggest movie toy tie-in comes from Disney Pixar’s upcoming animated film “Ratatouille,” about a Parisian rat who dreams of being a chef.
The company has described its “Ratatouille” toy line as being more limited than the expansive offering based on “Cars,” which helped drive Mattel’s entertainment division sales up 59% during the first quarter.
What’s more, some brisk-selling toys from Mattel competitors are cutting into its business.
Mattel CEO Eckert singled out Hasbro’s Littlest Pet Shop play sets and Webkinz, a line of stuffed animals from Canadian company Ganz, that come with a code allowing kids to interact with their pet on an Internet site.
Eckert downplayed Barbie’s U.S. troubles. “In the case of the first part of this year, Barbie’s been an underachiever,” he told analysts. “We -- and from what I’ve heard from our retail customers -- believe we have a strong fall lineup.”
