MATTEL, INC. at a Glance

Uppers

  • The world's number one toy maker.
  • The company is on a roll, having posted good results in recent years.

Downers

  • The company has been involved in several controversies including product recalls.
  • Fierce competition from rival toy makers including Bandai, Hasbro, Leap Frog, Lego and other.

The Bottom Line

  • The world's number one toy maker is doing a lot of the right things right now and is poised to remain in the top spot for years to come, but it faces plenty of challenges.

About MATTEL, INC.

Barbie is the platinum blonde in power at Mattel, the #1 toy maker in the world. Its products include Barbie and Polly Pocket dolls, Fisher-Price toys, Hot Wheels and Matchbox cars, American Girl dolls and books, and various Barney, Ferrari, and other licensed items. Mattel also sells action figures and toys based on Walt Disney and Warner Bros. movies. To satisfy techie kids, Mattel has accessorized Barbie with interactive games, software, and a line of MP3 players. The company has even licensed the Barbie name for eyewear. It also sells games (UNO) and puzzles. Mattel is trying to reduce its reliance on its biggest customers -- Wal-Mart, Toys "R" Us, and Target -- through its own catalog and Internet sales.

Operations

Prior to fiscal 2013 Mattel operated its business through geographic segments: domestic and international. It now uses North America, International, and American Girl.

The North American segment (which generates 45% of sales) markets and sells toys in the US and Canada, as its name suggests, through the Mattel Girls & Boys Brands and Fisher-Price Brands categories. In the Mattel Girls & Boys Brands category, Barbie includes brands such as Barbie fashion dolls and accessories, with the Polly Pocket, Little Mommy, Disney Classics, and Monster High lumped into the Other Girls Brands. Wheels include Hot Wheels, Matchbox, and Tyco R/C vehicles and play sets. Entertainment includes CARS, Radica, Toy Story, Max Steel, WWE Wrestling, Batman, and Superman, as well as games and puzzles. The Fisher-Price Brands category includes Fisher-Price, Little People, BabyGear, Imaginext, Dora the Explorer, Bubble Guppies, Thomas & Friends, Mike The Knight, Octonauts, Mickey Mouse Clubhouse, Disney’s Jake and the Never Land Pirates, and Power Wheels.

Products marketed by the International segment (45% of sales)are generally the same as those developed and marketed by the North America segment, although some are developed or adapted for particular international markets. Mattel’s products are sold directly to retailers and wholesalers in most European, Latin American, and Asian countries, and in Australia and New Zealand, and through agents and distributors in those countries where Mattel has no direct presence.

The American Girl segment generates nearly 10% of sales, and is a direct marketer, children’s publisher, and retailer known for its flagship line of historical dolls, books, and accessories, as well as the My American Girl and Bitty Baby brands. American Girl also publishes best-selling Advice & Activity books and the award-winning American Girl magazine. American Girl products are sold primarily in the US.

Geographic Reach

El Segundo, California-based Mattel fills toy chests worldwide. The toymaker sells products in more than 150 nations, across North America, Europe, Latin America, and Asia Pacific. North America accounts for about 55% of revenue. Europe is the company's largest international market, generating roughly 25% of Mattel's total sales. Latin America generates another nearly 15% of sales, while Asia brings in the remainder.

Sales and Marketing

Mattel capitalizes on major events, such as movie releases, by focusing on product tie-ins. In total, in 2014 the toymaker spent nearly $733.2 million (about 12% of net sales) on ads and promotion, down 2% from the $750 million spent in 2013, and up 2% from the $718 million spent in 2012. Mattel also promotes its toys and characters through online and broadcast media.

Looking at its brands, the Mattel Girl's and Boy's brand products generate nearly 60% of all sales, while the Fisher-Price brand products generate more than 30%. The company's American Girl brand brings in 10% of sales. The Construction and Arts & Crafts brand products bring in the remainder of revenue.

Mattel sells its products through its own retailers and wholesalers in most of the world and through agents and distributors in those countries where it has no direct presence. American Girl products are sold directly to consumers. Mattel supports its product lines with extensive advertising and consumer promotions. Advertising takes place at varying levels throughout the year and peaks during the traditional holiday season. Advertising includes television and radio commercials, magazine, newspaper, and internet advertisements, and social media. Promotions include in-store displays, sweepstakes, merchandising materials, and major events focusing on products and tie-ins with various consumer products companies.

Wal-Mart Stores ($1.1 billion), Toys "R" Us ($600 million), and Target ($500 million) are the company's three largest customers, altogether accounting for 35% of its worldwide sales. That total is beginning to decline as Mattel works to reduce its reliance on big retailers by selling more products directly.

Financial Performance

While the world's largest toy maker had seen its sales and profits rise steadily in recent years, the company's fortunes reversed course in 2014. Mattel’s revenue fell by 7% to $6.02 billion, mostly as from a decline in Entertainment, Fisher-Price Friends, Barbie, and core Fisher-Price product sales. With the exception of the Asia Pacific region where sales grew by 8%, product sales from North America, Europe, and particularly Latin America declined by five to 10% -- mostly due to lower sales of Entertainment and Barbie brand products.

Net income dropped by 45% to $498.87 million, mostly from the revenue declines but also because Mattel spent more on other selling and administrative expenses which involved design and development, identifiable intangible asset amortization (mostly related to trade names and existing product lines), and bad debt expense costs.

Despite lower earnings, cash from operations jumped by 27% to $888.56 million, mostly as the company paid significantly less toward toward its accounts payable, accrued liabilities, and income taxes payable obligations, and because the company sold off more of its inventory.

Strategy

Mattel has looked to capitalize on global growth opportunities (such as with the Ever After High line), innovate for growth in its key brands (Barbie, American Girl, and Hot Wheels), expand its girls portfolio, invest in international markets, improve efficiencies in its supply chain operations, and build its online and brick and mortar retail presence.

The company carried out the girls and international parts of its strategy in 2014 when it partnered with high-end Mexican retailer El Palacio de Hierro to offer American Girl merchandise in its stores. In early 2015, Mattel's popular American Girl division partnered with Fashion Angels, a designer of tween girls' fashion-focused lifestyle and activity products, to have the designer make craft kits and fashion sketchbooks for girls to create fashion accessories for themselves and their American Girl dolls.

As part of its retail expansion strategy, the company in early 2015 announced plans to open its own retail stores in Nashville, Tennessee and Scottsdale, Arizona.

To cut its operating costs, the company in 2015 launched its Funding Our Future cost-savings program designed to simplify global operations by making its supply-chains more efficient, and by making structural and process improvements.

Mergers and Acquisitions

With an eye on taking on LEGO, Mattel acquired Canada's MEGA Brands, the maker of Mega Bloks construction blocks, in April 2014. Mattel paid $460 million in cash to acquire the company, LEGO's biggest competitor.

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MATTEL, INC.

333 Continental Blvd
El Segundo, CA 90245-5032
Phone: 1 (310) 252-2000
Fax: 1 (310) 252-2179
www.mattel.com

Stats

  • Employer Type: Public
  • Stock Symbol: MAT
  • Stock Exchange: NASDAQ
  • Chairman and CEO: Christopher A. Sinclair
  • EVP Global Operations: Peter D. Gibbons
  • Chairman and CEO: Christopher A. Sinclair

Major Office Locations

  • El Segundo, CA

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