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Mattel : company profile

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Mattel lost its position as the world's biggest toymaker in 2017 to Hasbro. Historically, it has owed its years of prominence to a peroxide blonde named Barbie, still one of the world's best-selling toy brands after more than half a century. However sales have been under intense pressure for years as rival dolls and other toys muscle in to Barbie's territory. The Mattel toy box holds a number of other well-known brands including Fisher-Price infant and toddler toys and Hot Wheels, Matchbox and Tyco cars. There are also several key licensing deals, with partners including Warner Bros/DC Comics and Pixar movies, but Mattel lost the immensely valuable Disney Princesses franchise to Hasbro at the end of 2015. A catastrophic foray into interactive software almost brought the company down in the late 1990s. Mattel made a full recovery from that, but a renewed slump since 2012 has led to five different CEOs in six years, and it's not over yet.

Advertising

Click here for a listing of Mattel Agency Account Assignments from Adbrands.net. Including unmeasured media, the company declared advertising and promotion expenses of $526m in 2018.

Competitors

See Toys & Games Sector index for other companies

Brands & Activities

Mattel's demotion from the #1 position in toys after a near-25 year reign was further proof if needed that this remains a brutally tough industry, subject to fierce competition, rapidly changing fads and fashions, and the concentration of sales among a comparatively small number of retail customers. Mattel has for many years relied upon the underlying strength of its key brand, unquestionably the #1 girls' toy worldwide. But there is little doubt that the Barbie brand is now mature and in steady overall decline globally. Compared to US arch-rival Hasbro, Mattel is strongest in girls' dolls, vehicles and pre-school. But Hasbro now has the edge in licensed entertainment tie-ins.

The group has restructured several times in order to deal with slowing sales of its core Barbie brand. A reorganisation in 2003 created three divisions. Mattel Global Brands replaced what had previously been separate divisions handling Girls' and Boys/Entertainment toys respectively, while Fisher-Price and American Girl retained separate operating autonomy. The Mattel Girls & Boys business reported sales of $3.1bn for 2017, down 4%.

Traditionally, girls' toys have been Mattel's greatest area of strength, centred around star brand Barbie, far and away the company's biggest brand. Mattel's own research shows that the average American girl aged 3-11 owns ten or more Barbie dolls and more than 1bn dolls have been sold since 1959. However US sales have been in steady decline since the end of the 1990s, falling by as much as 21% in 2005 alone. In the past, these declines were tempered by a rise in international sales, but since 2003, non-US sales have also been slumping. The brand regained some stability after 2005, bouncing up and down for several years, but then another steady decline set in from 2011. Mattel declared a sales figure for 2014 of just over $1.0bn, down 16% on the year before. The sharpest decline was internationally, with sales plunging 21% in 2014. Worldwide sales continued to fall during 2015, down 10% across the full year to a multi-year low of $906m. There was a temporary recovery in 2016, with sales rising by 7% for the year to $972m. However, it didn't last, and full-year sales slipped back to $954m despite growth in the final quarter. A welcome rebound at the end of 2017 has held steady through 2018, though, with sales ending the latter year at almost $1.1bn, their highest level since 2013.

The slow overall decline of Barbie has reflected the increasing popularity of electronic toys over traditional dolls, as well as the emergence of "cooler" rivals to Barbie's crown, in particular MGA Entertainment's more ethnic-looking and streetwise Bratz. These launched in 2000 and had an almost immediate impact on Barbie's sales. Mattel tried a number of different strategies to offset their extraordinary popularity. In 2001, it launched a new range of customisable fashion dolls under the What's Her Face brand, and extended Barbie into the trendy My Scene range, targeting the "tween" age group. However these failed to halt the erosion of sales. In 2003, Mattel launched its own inhouse competitor to Barbie, the Flavas, in a bid to counter Bratz' success. Sales were poor and the line was discontinued after just a year.

Sales of Bratz soared between 2001 and 2005, peaking in the latter year at around $750m. The success of Bratz was even more galling because the dolls were in fact designed by a former Mattel employee, Carter Bryant. Over the years, Mattel issued a number of lawsuits against both Bryant and MGA, claiming that his original designs for Bratz were made while he was a still a company employee. Under the law of copyright, it was argued, ownership therefore belonged to Mattel not MGA. In 2008 a US court finally ruled in favour of Mattel and also decided that MGA's chief executive had interfered with the contractual duties owed by Bryant to Mattel. The larger company was awarded $100m in damages as well as full ownership of the Bratz brand. MGA was ordered to stop manufacturing Bratz and was given a deadline to withdraw all existing Bratz dolls by Spring 2010. Yet before that deadline was reached, an appeals court suspended the sentence while it pondered whether the original verdict had been too harsh.

In summer 2010, MGA's appeal was upheld, a retrial was scheduled and the first verdict was overturned. Rights to Bratz were returned to MGA, and instead Mattel was fined $88m for committing corporate espionage during its investigation. Yet the interruptions to MGA's business had by then already impacted on Bratz' sales. Instead, MGA had introduced a new line of fashion dolls, Moxie Girlz, which launched in August 2009. The Bratz litigation dragged on through 2012 and into 2013 with a series of appeals over different aspects of the case, with no material change. MGA brought a new suit against Mattel in 2014. The cost to Mattel overall was estimated at over $200m in litigation fees and penalties.

In the mean time, Mattel had attempted to bolster Barbie's popularity with a range of themed story-based lines, and by introducing a cast of new supporting characters, including Australian hunk Blaine, a rival to Ken. Barbie and Ken's long-term romance was officially suspended by Mattel in 2004 to make space for other suitors. (Bowing to public pressure, as well as the storyline of Pixar's Toy Story 3 movie, Barbie and Ken's romance was officially back on again in Feb 2011.) Worlds of Barbie launched in 2004 with themed collections Fairytopia, Happy Family and Cali Girl. These were supported by a wider range of movie, TV and video tie-ins (including at one point a Barbie American Idol co-promotion), as well as strategic added value promotions, such as additional accessories bundled with dolls at no extra cost. In 2006 the company launched a Barbie Fairytopia live musical touring show, in a joint production with Clear Channel Entertainment. It also lends itself to at least one new specially produced animated DVD movie every year, each with an accompanying range of dolls and accessories.

In one of its most unconventional brand extensions, the group launched a range of Barbie-themed MP3 players in 2007 under the name Barbie Girls. The devices also allowed users to interact with one another through a dedicated website. An interactive gaming experience was launched in 2007 as Barbie iDesign, spread across trading cards, interactive CDs and the online portal. In 2009, also Barbie's 50th anniversary, the group reissued a set of five vintage dolls from the past, followed by a brand new model, Barbie Fashionista, with a line of "designer clothing" and more movable joints. The group also introduced its first standalone range of black Barbie fashion dolls under the So In Style by Barbie banner. In the most striking change to the portfolio, the group introduced three new body types in 2016 of petite, tall and curvy, joining the traditionally thin-waisted, long-legged original doll.

Licensing of the Barbie brand is also a steady earner for the group. Most Barbie-branded apparel or accessories are aimed at a young girls or teenage market, but in 2003 Mattel commissioned Japanese fashion house Sanei International Co to design a range of Barbie Couture clothing for adults, loosely based on actual outfits Barbie has worn. Sanei opened 10 boutiques in Japan in 2003 with some success, and Mattel began exploring ways of introducing the clothing elsewhere. In 2004, British fashion designer Julien Macdonald was commissioned to produce a range of limited edition premium-priced childrenswear under the Barbie Fashion brand for sale in upscale London department store Selfridges. In 2005, Mattel signed an agreement with Benetton to design and market a range of clothing under the label 'Barbie loves Benetton'. The apparel featured four looks, themed to the cities of London, Paris, New York and Stockholm, and launched in Benetton shops in September 2005, supported by two limited edition Barbie dolls. In 2007, MAC, a division of Estee Lauder, introduced a Barbie-branded cosmetics line. Mattel doesn't declare its income from licensing fees, but worldwide retail sales of licensed Barbie-branded merchandise are estimated at around $2.3bn.

In 2010, Mattel launched another character doll franchise, Monster High, a sort of tween-oriented Addams Family concept. The core dolls are supported by a full range of associated spin-offs including web content, licensed clothing, a series of straight-to-video animated movies and more recently an original series on Netflix. This range was very successful for a few years, boosted by the wider interest among adolescent girls in supernatural subjects as a result of Twilight and other pop culture phenomena. However sales peaked in the mid 2010s, and have more recently been in steep decline.

The group also enjoyed considerable success for several years with rights to produce dolls and other merchandise under the Disney Princesses banner. The huge popular successes of the Frozen movie generated considerable demand for tie-in dolls and other product in 2014 and 2014. However, Mattel's Disney Princesses contract expired at the end of 2015 and was lost to Hasbro. Other girls' toys include Pixel Chix electronic toys, Polly Pocket miniature dolls and Diva Starz fashion dolls and the Little Mommy babies range. The once-famed Cabbage Patch Kids range was discontinued during 2002, but Mattel launched Ello, a new creative building system which allows girls to make their own jewellery, accessories and play sets. The loss of Disney Princesses, a sharp decline in Monster High and also in other products resulted in another plunge in revenues from non-Barbie girls' toys from $954m in 2015 to just $298m for 2017.

Mattel's boys' portfolio is smaller but has performed quite well in recent years. The group's best-selling toy for boys is the Hot Wheels racing cars range, the #1 boys' brand worldwide. It is supported by Matchbox and Tyco Racing, respectively the #2 and #3 car brands. Hot Wheels alone contributed sales of $834m in 2018. Other top-selling action toys include Rock 'Em Sock 'Em Robots, Masters of the Universe and Max Steel action figures. Xtractaurs is an innovative action figure concept which allows toy owners to play online using "DNA" extracted from their physical toys.

Mattel Games has a smaller portfolio of games than rival Hasbro, but does control Scrabble and Pictionary outside the US, Ker-Plunk, Othello, UNO and Chatter Matters. Among recent introductions are DVD-based quiz games, including Scene It? In 2006, Mattel acquired Radica Games, a manufacturer of electronic entertainment toys including 20Q, Girl Tech and Play TV. In 2007, the group bought Out Of The Box Publishing, whose card-based games include Apples To Apples, Snorta and Blink.

In the all-important world of licensed toys, Mattel has an extensive agreement to manufacture toys and games based on Warner Bros/DC Comics properties, including Batman, Superman and Justice League. This has spawned a wide collection of products tied in to the Dark Knight movies and the Man Of Steel Superman reboot in 2013, as well as TV animations and comics. The deal also covers toys and board games based on Warner's Harry Potter franchise (Hasbro has the trading cards license). There is also a tie-up with Nickelodeon, which brings SpongeBob SquarePants, Jimmy Neutron, and Rugrats into the fold. In 2006, the group agreed a licensing deal with Time Warner's Cartoon Network to develop games, puzzles and other toys based on shows such as Powerpuff Girls and Foster's Home for Imaginary Friends. There is also a tie-in with the WWE wrestling franchise.

The group lost its entertainment license for mainstream Disney movie tie-ins to Hasbro in 2001, and then the Disney Princesses line in 2015, but has a separate deal to manage tie-ins for Pixar movies such as Cars and Toy Story. The Cars toy family has proved especially successful. The group's links to Disney allowed it to capture a license to produce Star Wars-inspired cars and other vehicles from 2014. Fisher-Price has pre-school rights on all Disney products. Royalty expenses payable by Mattel to Warner, Disney and other rights owners vary from year to year, bouncing from a high of $265m in 2015 to $230m in 2016.

In 2011, the group took steps to develop its own character portfolio further, acquiring rights owner Hit Entertainment for $680m. That deal gives Mattel ownership of a collection of pre-school characters including Thomas & Friends, Bob The Builder, Barney, Pingu, Angelina Ballerina and Fireman Sam. It licensed the first Thomas The Tank Engine theme park, which opened in the US in 2015. This so-called Entertainment division contributed sales of $978m in 2017.

In 2014, the group set about strengthening its defenses against fast-expanding LEGO by acquiring the Danish toymaker's main rival, Canadian company MEGA Bloks, for $460m. That brand will contribute around $405m in additional annual sales. This is now the core of a new Construction & Arts & Crafts division, which also has licensing rights to produce sets based on the Halo, Call Of Duty and Assassin's Creed videogame series as well as the movie Terminator Genisys. Combined construction sales crashed 29% in 2017 to $270m.

Barbie is partnered within the wider Mattel portfolio by her rather more serious cousin, the American Girl range. Despite its apparent similarities to the Barbie business, this operates as an entirely separate business unit. It markets a range of much more expensive themed dolls and books, with a particular emphasis on cultural education and female self-esteem. Doll prices start at around $100 instead of $15-$20 for Barbie, so buyers are more likely to be adult collectors than "tween" girls. American Girl magazine, celebrating female achievements for a young audience, reaches more than 700,000 subscribers. American Girl also holds the license for Angelina Ballerina toys and dolls in the US. Although most sales are made by mail order, the division has a small number of retail outlets in major cities. It is accounted for separately from the main Girls' & Boys' Brands business. It has been one of the group's weakest performers in recent years, with sales falling by 21% in 2017, and by another 28% in 2018 to $342m.

Fisher-Price is the umbrella for Mattel's range of infant and pre-school products, led by the Fisher-Price Little People playsets and now Thomas & Friends. In addition to the Fisher-Price brand, these include Power Wheels cars, Magna Doodle, View-Master and selected licensing deals for Disney pre-school items, Winnie the Pooh, Barney, Sesame Street Toys and selected Nickelodeon brands (including Blue's Clues and Dora The Explorer). Although Fisher-Price now operates as part of the main Mattel Brands unit, the group still declares its revenues. These actually continued to rise steadily for several years, despite declines in main Girls' & Boys' business. However, that curve was suddenly reversed in 2017 with an 11% decline to $1.7bn.

The group closed down a disastrous foray into interactive products with the sell-off of subsidiary unit The Learning Company in 2000. Instead Mattel has a wide-ranging licensing deal with Vivendi Universal Interactive Publishing, which has the exclusive license to develop software based on Mattel products. Mattel has had a strategic alliance with the world's #3 toymaker Bandai since 1999. Bandai markets Mattel's toys in Japan and Korea, while Mattel assists Bandai with the Latin American market.

Financials

For 2011, Mattel finally surpassed its previous best-ever sales figure from 2007, with group revenues rising 7% year-on-year to just under $6.3bn. Another 2% increase in 2012 took the figure to $6.42bn. Net income edged up 1% to a best-ever $777m. The US market accounted for 56% of all sales in 2012. Revenues for 2013 edged up by just 1% to a new peak of $6.48bn, while net income jumped 16% to $904m.

Figures for 2014 were disappointing, with revenues slumping 7% to $6.02bn, their lowest level since 2010. Net income plunged 45% to $499m. Currencies left a big dent in results for 2015, with reported revenues slipping by 5% to $5.70bn. (At constant rates they would have risen by 2%). Net income plunged 26% to $369m.

For 2016, revenues continued to fall, slipping a further 4% (including a 2% currency hit) to a new seven-year low of $5.46bn. A key factor was the loss of revenues from the Disney Princesses range, worth around $450m-$500m in sales. Net income slumped 14% to $318m, just over a third of the level three years earlier. Falling share values left Mattel worth half as much as rival Hasbro by mid 2017, with a market cap of $7bn to the rival's $14bn.

Another 11% decline in 2017 lowered full-year revenues to $4.88bn, the first time since 2003 they had fallen below $5bn. As a result, Hasbro - at $5.21bn - officially overtook Mattel for the first time in almost 25 years. Like other US corporations, Mattel took took a big hit from tax reforms in 4Q, and these combined with the fallout from the bankkruptcy of Toys R Us, to deliver a net loss of over $1.05bn. Yet even without exceptional factors, gross profit margins were slashed by almost 50%, resulting in negative EBITDA of $125m.

The group's three biggest US customers of Walmart, Toys R Us and Target represent between them 39% of total worldwide sales. Walmart alone accounts for sales of $1.1bn, more than Toys R Us and Target combined.

Mattel's revenues continued to slide during 2018 despite a welcome rebound for long-suffering flagship brand Barbie, whose sales have increased for five consecutive quarters. Full year sales for Barbie of almost $1.1bn represented their highest-level since 2013. Sales of Hot Wheels cars were also at best-ever levels at $834m. However, most other lead brands suffered declines, and the liquidation of retailer Toys R Us left a significant dent on all toy manufacturers during the year. Reported net revenues fell 8% to $4.51bn. Net loss halved from the previous year to $531m, and operating profit was also still in the red as a result of severance and restructuring expenses.

North America accounted for 50% of revenues in 2018, or $2.27bn; Europe for 18% or $827m; Latin America for $554m and global emerging markets for $531m. The biggest individual markets outside the US are the UK, France, Germany, Italy, Spain, Northern Europe, Canada and Mexico.

Background

Mattel was formed in 1945 by partners Harold Matson and Elliot Handler - the Mat and El of the company's name - to market a range of home-made picture frames. Later they used off-cuts from the frames to produce dollhouse furniture. Matson sold out his share in 1949, and Handler took control of the business with his wife Ruth. Their new products included ukuleles and other musical toys, as well as the "Burp Gun" cap pistol. The company had its first lucky break when it sponsored one of Walt Disney's first moves into television, the Mickey Mouse Club, and picked up that company's merchandising license. Far more significant was the invention in 1959 of a girls' dress-up doll, which the Handlers named after their daughter Barbara. Barbie was followed by Ken - the name of the inventors' son - in 1963. Barbie was an enormous hit, and a series of spin-offs and accessories kits have maintained the toy's astonishing global popularity over the years.

Mattel floated part of its stock in 1960 and went on an acquisition spree over the next two decades, buying up a series of other companies including the Barnum & Bailey-Ringling Brothers circus and children's publisher Golden Books. The company also tackled the boys' market with the launch of Hot Wheels cars. But by the 1970s Mattel had begun to run into trouble. The Handlers were removed from control after irregularities were discovered in the company books, and by the mid-1980s, after a disastrous foray into video games with its Intellivision home entertainment subsidiary, Mattel was deep in the red, reporting a $93m loss in 1987 on $1bn sales. Massive restructuring pulled the company back into profit by 1990. In 1994, it bought pre-school toymaker Fisher-Price. Also that year Mattel bought UK company JW Spear from under arch-rival Hasbro's nose. The British company had acquired international rights to the board game Scrabble in 1948, the same year its American inventors sold US rights to a local company later acquired by Hasbro. The two companies have split global rights to the game ever since. In 1985 Mattel's British model car company Corgi was sold to management for £13m.

In 1996, Mattel attempted a $5.2bn hostile takeover of its arch-rival Hasbro, but was forced to pull out on the prospect of an anti-trust investigation. Instead Mattel paid $755m for then #3 toymaker Tyco, which also included the Matchbox model car range, View-Master 3-D viewers and Magna-Doodle drawing toy, as well as the toy licensing rights to Sesame Street. In 1998, the company paid $700m for Pleasant Company, makers of American Girl, a range of theme-based dolls representing different aspects of American history. It also bought up Bluebird, makers of the Polly Pocket miniature dolls for $46.5m.

During the 1990s, the group noticed signs of a distinct change in the market as children became more sophisticated, demanding high-tech toys at younger and younger ages. As a result Mattel began to move heaily into multimedia, setting up a dedicated interactive software division, Mattel Media. In addition, despite the earlier experience with Intellivision, CEO Jill Barad announced that the group would acquire educational software business The Learning Company for $3.8bn. Almost incredibly, Mattel were to be burned a second time for venturing into multimedia entertainment. In their rush to buy The Learning Company, the group apparently didn't give sufficient attention to serious financial problems at the software business, which reported massive losses of $100m only months after the purchase. In another emphatic move towards the computer market, in 1999 Mattel announced a tie-up with Canadian PC-maker Patriot to launch a series of PCs, branded as the Barbie PC and Hot Wheels PC.

Despite restructuring, the financial problems at The Learning Company refused to go away. In early 2000, divisional losses at The Learning Company rumoured to be as high as $300m forced Mattel into a group net loss of $82m for 1999. Group CEO Jill Barad and president Ned Mansour both announced their resignations soon afterwards. Few were surprised when Mattel announced that it was seeking buyers for The Learning Company. The business was finally sold to private buy-out firm Gores Technology at a fraction of the original purchase price. The Patriot computer deal also went bad when the Canadian company went bust at the end of 2000. Several thousand customers who had bought Barbie or Hot Wheels PCs never received their goods and lost their money (Mattel later offered them a $100 voucher in compensation).

New chairman-CEO Robert Eckert, recruited from Kraft Foods, was appointed in 2000, and set about another massive restructuring. The scale of the problems at The Learning Company were revealed when Mattel reported that it would have to write off a $600m loss from discontinued operations, leading to a net loss for the year 2000 of $431m. Eckert's principal goal since then has been to find a way of returning the company to profit while also building sales. This he appears to have achieved through careful management of inventory, and a focus on core brands.

However, in summer 2007, Mattel was forced to issue a massive recall of almost 22 million toys made in China in three separate announcements. Almost 3m of these toys were recalled because they were coated with a potentially toxic lead paint. The vast majority, however, contained small magnets identified post-production by Mattel as a swallowing hazard. Early the following year, in a rare show of solidarity, Mattel and Hasbro joined forces to try to stop Facebook from making an unauthorised software version of Scrabble available to its users. (Mattel has international rights to the Scrabble brand).

Last full revision 11th July 2017

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