THE TREND LINES OF MISFIT TOYS
MAT TEL: REWRITING A TOY STORY
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FORTUNE.COM // DECEMBER 2019
late). Its two most important brands, Barbie
and Hot Wheels, are selling well. What’s more,
both are on track to become feature films, a
key pillar in CEO Ynon Kreiz’s plan to remake
Mattel from a not-terribly-efficient toymaker
to a media company that leverages its time-
tested and beloved characters and gadgets.
It’s enough for Kreiz, who is 18 months into
his tenure running the company, to suggest
that Mattel has a future, even if its problems
are far from solved. “The turnaround is work-
ing,” Kreiz told investors. In an interview a few
days later, he exudes guarded optimism. “We
are starting to think about growth,” he says.
“You can see how we’re focusing the company.”
Longtime followers of Mattel will be for-
given for thinking they’ve heard it all before.
Kreiz is its fourth CEO since 2012, the latest
in a string of well-credentialed executives who
thought they knew what it would take to fix
the toymaker. The most recent was Margo
Georgiadis, a former top Google executive
who quit to take another job after just over a
year at Mattel.
Mattel’s list of woes is long. It has a habit of squandering advan-
tages, like the long-term decline in its once-dominant American
Girl doll business or the loss to Hasbro, in 2016, of a lucrative
license to manufacture Disney princess dolls. The company’s bal-
ance sheet is weak, the result of high debt and declining sales. The
2017 bankruptcy and subsequent liquidation of Toys “R” Us dealt
a blow to Mattel’s entire industry. “The toy business has not been
very good,” says Stephanie Wissink, a Jefferies analyst who has
followed the industry for nearly 20 years. “And the cash flow of the
company is dependent on the toy business being good.”
Kreiz doesn’t disagree. But by pivoting Mattel to become less of a
toy company and more of a higher-margined media enterprise built
on a stable of valuable brands, he thinks he can take a page from
Hasbro, which has brought Transformers, G.I. Joe, and others to
the silver screen and recently announced plans to buy kids’ media
firm Entertainment One. Hasbro’s gross margins are 51%; Mattel’s
are 39%. Kreiz also has his eye on a bigger colossus: Disney. It’s an
organization he knows well, having sold it two companies over the
years. It’s not even out of the question that if Kreiz is truly success-
ful, Mattel could be the third.
O ONE THING WENT WRONG at Mattel. But in the recent past,
there has always been something going wrong, some
part of the company sputtering even as other parts
chugged along. Earlier in this decade, when American
Girl was doing great, dolls associated with Disney’s
Frozen franchise—manufactured at the time by Mattel—cannibal-
ized Barbie sales. Monster High merchandise collected annual
sales in the hundreds of millions of dollars—and then collapsed.
Hot Wheels flatlined at the worst possible moment, just as
American Girl became oversaturated. It all contributed to a steady
erosion in Mattel’s sales, from $6 billion in 2014 to $4.5 billion in
- (Analysts are expecting flat revenue growth in 2019.)
Kreiz, pronounced “cries,” has a theory about the decline. “The
company was too successful for too long for its own good,” he says.
It didn’t move fast enough in updating its manufacturing and
supply-chain operations. It didn’t freshen its retail approach. And
it lagged in innovation. Years after Hasbro ditched its factories in
favor of outsourced manufacturing, Mattel continued to oper-
ate its own facilities. “Except for Lego, no one makes their own
toys,” says Kreiz. Mattel’s employment peaks at 40,000 at times of
maximum factory output. Hasbro, whose sales are comparable to
Mattel’s but is worth three times as much, has fewer than 6,000
employees. (Among Kreiz’s first moves as CEO: cutting the work-
force by 22%.)
Then there was the inescapable fact that Mattel’s most im-
portant brands—Barbie, Hot Wheels, Fisher-Price, and Thomas
the Tank Engine—were, to put it politely, long in the tooth. The
company hadn’t come up with a genuine hit in years, even though
it deftly sold what it had. A former Kraft Foods executive, Robert
Eckert, ran Mattel for 12 years beginning in 2000, and the ethos
of consumer packaged-goods “brand management” dominated
the company. “We were comparing ourselves more with P&G and
Kraft while competing against Hasbro and Disney,” says Richard
Dickson, Mattel’s president, who worked at the company in that
0
10
20
30
40
$50
2012
FY 2011 2012 2014 2016 2018
2014 2016 2018
NOV. 1, 2019
$11.89
MATTEL STOCK PRICE
MATTEL REVENUES
0
2
4
$6 B.
$4.5
BILLION
SOURCES: BLOOMBERG; S&P GLOBAL
