Mattel (US)

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Mattel is hanging on for now as the world's #1 toy company but it faces fierce competition for that position from Hasbro and Lego. 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 four different CEOs in five years, and it's not over yet.

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Mattel website

Brands

Barbie Matchbox
Mattel Classic Games Hot Wheels
Chatter Matters UNO
Whats Her Face View-Master
Othello MEGA Bloks
Scrabble American Girl
Fisher-Price Sesame Street Toys
Power Wheels Polly Pocket
Max Steel Diva Starz
Tyco Racing Rock 'Em Sock 'Em Robots

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 14th Dec 2017: No signs of a happy landing for Mattel this quarter. With little more than a week to go for holiday shopping, the struggling toymaker warned that sales for the current quarter will be down by a mid to high-single digit percentage, while bottom line will be dented by a write down of inventory and heavy discounting to shift its remaining stock. Rating agencies have already estimated a 8% decline in sales for the year, and a slump of as much as 50% in earnings. Traditional rival Hasbro is generally doing very much better than Mattel, but it too lacks any breakout hits this holiday season; the biggest winners among traditional toymakers are independent companies. Top selling toys in the US this Christmas are LOL Surprise! dolls from Mattel's arch-enemy MGA Entertainment (the company behind Noughties hit dolls Bratz), as well as Hatchimals and Fingerling Monkeys, both from independent manufacturers.

Adbrands Weekly Update 7th Dec 2017: Ads of the Week "Family". Mattel wraps itself in some warm-hearted Christmas spirit with this seasonal reminder that there is no better time for a game of Scrabble than over the holiday season. Provided you don't live in North America. Mattel don't want you playing Scrabble there because they don't own the board game in the US and Canada; Hasbro does! In fact, you're probably not even allowed to watch the ad. MullenLowe's LOLA Madrid does the creative honours for everywhere else, travelling the global for a series of vignettes that illustrate the game's truly international appeal. 

Adbrands Weekly Update 16th Nov 2017: Oh, the indignity of it. One-time leader in the global toy industry Mattel has received a takeover approach from US rival Hasbro, which has risen from third place to the current #1. Mattel's performance has been in steep decline over the past two years as sales of long-time cornerstone Barbie slump, with the result that its market cap of $5bn is now less than half Hasbro's $11.4bn. No details of the talks were disclosed, and any deal would be subjected to considerable regulatory scrutiny. However, the toy landscape has changed dramatically since the last time such a merger was discussed two decades ago. Mattel offered to acquire then-struggling Hasbro in the 1990s, but was rebuffed. Since then, with the notable exception of LEGO, most traditional toymakers have seen a sharp decline in their sales as kids have transferred their affections to high-tech products like computer games and smartphones. Manufacturers' woes have been exacerbated by the decline of specialist retailers, such as Toys R Us, which filed for bankruptcy earlier this year. Mattel now risks losing part or all of the $135m it is owed by Toys R Us, while Hasbro's debt is less than half that sum. A combined Hasbro-Mattel would pose an challenge for regulators, nonetheless, with around a third of the highly fragmented US market in traditional toys. In three segments of model vehicles, dolls and action figures it would have more than 50% share. We shall see how this plays out.

Adbrands Weekly Update 27th Apr 2017: In a shock turnaround, Mattel was overtaken as the world's biggest toymaker by longtime rival Hasbro following a grim set of results for 1Q. Mattel's sales fell by 15% to $815m, with declines across all divisions, even at constant exchange rates. Sales of key brands Barbie and Fisher-Price fell by 13% and 9% respectively, while Entertainment and Other Girls' Toys plunged by more than a quarter and more than a third. The newly created Construction and Arts & Craft division - designed to compete with Lego - suffered a shock 38% drop. That resulted in a net loss for the quarter of $113m. By contrast, Hasbro's revenues for the quarter were up by 2% to $850m as a result of strong gains in entertainment toys and board games.

Adbrands Weekly Update 9th February 2017: In a reversal of fortunes that would once have seemed impossible, America's traditional #2 toymaker could be on course to unseat arch-rival Mattel. Boosted by its capture of the prized Disney Princesses franchise from the larger company, Hasbro's revenues soared by 13% in 2016, topping $5.0bn for the first time in the company's history. Meanwhile Mattel slumped 4% to a seven-year low of $5.5bn. Similar performance in the current year would give Hasbro the lead. That's already happened on the bottom line, with Hasbro's net income up 11% to $533m, against Mattel's $318m. Hasbro's performance in 2017 will depend not just on the continued growth of Disney Princesses, but also another sizeable boost from the forthcoming Transformers movie, for which the company holds toy rights.


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Background

Free for all users | see full profile for current activities: 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). See full profile for current activities


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