Mattel, Inc. MAT, like most other traditional toy makers, has been bearing the brunt of soft consumer demand and a sales crunch. In an effort to navigate such challenges, the company has been collaborating with different entertainment companies to ensure a just distribution of its products.
To this end, Mattel partnered with Metro Goldwyn Mayer Pictures (“MGM”) to develop a live-action motion picture based on View-Master. Mattel and MGM are supposed to produce the film. This collaboration is the second in line after Mattel and MGM decided to create a feature film based on the American Girl brand.
A few months back, Mattel also partnered with AT&T Inc.’s T Warner Bros. These partnerships are likely to drive Mattel’s sales over the long term.
Shares of Mattel have gained over the past three months against the industry’s collective decline. The share price appreciation can be attributed to the company’s robust point of sale momentum. Further, partnerships and expansion in international markets bode well for Mattel.
Partnerships are Dire Need of the Hour
All of Mattel’s recent strategies hint at the company’s unremitting aim of reviving sales and form the business in a way that would ensure a new organization design, capable of bringing positive transformations and building capacities.
The above-mentioned move will help Mattel engage on a deeper level with consumers, thereby driving sales. The company, as it is, relies heavily on strong product line-up, which includes core brands, licensed brands and lucrative product associations. Owing to its popularity among young boys and girls, its premier brands like Hot Wheels have been the category leader in multiple product segments for several years.
Mattel also forayed into other consumer product categories such as apparel, fashion and accessories to build brands. In fact, in 2018, worldwide gross sales for Hot Wheels were up 9% and reached the highest annual sales in its 50-year history. Global POS was also up by a high-single digit for the year.
Our Take
While we appreciate Mattel’s efforts to chalk out counter strategies and adapt to changing demand, we remain apprehensive about the fact that the company has not been able to revive sales yet.
Mattel, like Hasbro HAS and JAKKS Pacific JAKK, is expected to keep shouldering the Toys ‘R’ Us liquidation effect in the near term. In fact, owing to the liquidation, Mattel’s net revenues in 2018 declined 7% year over year on a constant-currency basis. It also led to a sales slump across most brands under Mattel.
Mattel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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