This summer, Mattel Inc. is betting big on Barbie and the merchandising tie-ins with the, “Barbie” motion picture.
And its stock is shooting up.
The share price of the El Segundo-based toy manufacturer is up 15% over the past month, outperforming the stock price of competing toymaker Hasbro, which saw a 3% gain in the same period.
The “Barbie” movie, starring Margot Robbie as the perky doll and Ryan Gosling as Ken, lands in theaters on July 21. It was co-produced by Mattel Films and is being released by Warner Bros., which is based in Burbank.
In a conference call with analysts in late April to discuss first-quarter financials, Chief Financial Officer Anthony P. DiSilvestro said that the company’s dolls category suffered a sales decrease of 22%, primarily due to a decline in Barbie sales.
“POS (point of sale) for dolls increased low single digits. Barbie POS was down high single digits, but significantly better than shipping, which declined 40%,” DiSilvestro said during the call.
Fred Wightman, an analyst with Wolfe Research LLC, asked Mattel management if, in light of the slumping sales in Barbie in the first quarter and the fourth quarter of last year, if the brand was “well positioned to make the most of the upcoming movie launch or not?”
Richard Dickson, the president of Mattel, said the company was “incredibly confident and excited about Barbie’s future.”
Dickson said he wanted to remind Wightman and the other analysts about the shift of promotional activity on Barbie had been moved into the second quarter, the better to align with the release of the movie.
“In Q2, we are expecting a much better performance compared to Q1, and we’re really confident that we’re going to continue to gain momentum in the back half and grow in the full year,” Dickson added.
Merchandising tie-ins with the movie include apparel lines from the Gap Inc. and Forever 21, also known as F21 OpCo LLC; the Superga x Barbie shoe collection; headbands from the Lele Sadoughi x Barbie collaboration; and whipped body Barbie butter and other body lotions from Truly Beauty Inc.
Despite the Barbie collaborations and expectations for the brand when the movie comes out, Ynon Kreiz, the chief executive of Mattel, expects no change in Mattel management’s estimate of the industry being flat to slightly up in the near term, while it will likely grow in the long term.
“We believe the toy industry is a (long term) growth industry. We expect it will continue to grow over time. Industry has shown resilience and consistency – consistent growth for more than a decade now, including during challenging economic times,” Kreiz said.
At least one analyst agreed with the upbeat outlook.
Andrew Uerkwitz, an analyst with Jefferies LLC, said in a research report from April 27 that management sounded confident inventory was being worked down in line with expectations, the (second half of the year) would “return to normal.”
“We somewhat agree when looking at (Mattel) share gains, execution, and resilient categories like wheels, but continue to worry about POS and heavily-weighted (second half) to hit guidance,” Uerkwitz wrote in the report.
On April 26, Mattel reported a net loss of $107 million (-30 cents a share) for the quarter ending March 31, compared with net income of $22 million (6 cents) in the same period of the previous year. Revenue decreased by 22% from the first quarter of the prior year to $815 million.
Mattel will announce its second quarter earnings on July 26. That is only a few days after “Barbie” comes to theaters but it could show how related merchandising deals have impacted the company’s bottom line.
But Barbie isn’t the only IP that Mattel is betting on.
Hot Wheels, its die-cast car collection, is also figuring in big for the company, with the Hot Wheels Ultimate Challenge primetime show on NBC this summer and a feature film planned to be produced by J.J. Abrams for Warner Bros.
Also, its competing car collection Matchbox will be the subject of a live-action film to be produced by Skydance Media, the Santa Monica company behind “Top Gun: Maverick” and the last several films in the “Mission Impossible” franchise.
Mattel also has plans to relaunch Barney.
