Morningstar

Morningstar, Inc.

Equity Bottom-Up

Mattel's turnaround remains ongoing, hindered by the 2018 liquidation of Toys 'R' Us and ongoing deceleration in Toy Box product demand during a period of secularly slow growth. After stringing together decent growth under previous CEO Chris Sinclair across core brands, inventory clearance and stock-keeping unit creep of lower-productivity brands hurt performance throughout 2017-18. However, the firm's turnaround plan strikes us as a step change, placing heightened focus on core brand…

Barbie and Hot Wheels continued to carry the load for narrow-moat Mattel in its first quarter, with gross sales up 7% and 4% on an as-reported basis. Those two brands represented nearly 40% of sales, helping offset the ongoing declines the firm is experiencing in Fisher-Price and Thomas, which had gross sales that tumbled 8%. All in, this led to gross sales declines of 2% in the quarter, ahead of the 5% shortfall we had anticipated. Furthermore, structural simplification efforts began to pay…

<p>Before the beginning of 2015, Mattel was very operationally driven, trying to focus on developing products aligned with consumer demand while continuing to cut costs. However, the company wasn’t spending its dollars tactically on enhancing the creative and content landscapes of the business, which have been primary areas for growth across the toy industry. In contrast, Mattel's main peer, Hasbro, has increased profits at a faster rate in recent years, thanks to solid storytelling across multiple…</p>

United States

Mattel, Inc. designs, manufactures, and markets a broad variety of children's toy products on a worldwide basis.  The Company sells its products to retailers and directly to consumers.  Mattel's products include branded fashion dolls, infant and preschool products, toy cars, and electrical vehicles, among others.

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