Analysis: Barbie is Mattel's biggest asset in turnaround plans following TRU headache

Toys R Us impact was biggest factor in Mattel's 14 per cent Q2 earnings dip; without the fall-out Mattel sales would be up on Q1.
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Mattel’s fashion brand Barbie has been highlighted as the firm’s biggest asset in its turnaround plans, cited as the number one growth brand in the category.

The toymaker recently reported a sales decline of 14 per cent in the second quarter earnings, with total sales coming in at $841 million.

The firm highlighted the impact of from Toys R Us (a decline of ten per cent) as the biggest contributing factor, but it has been noted that without this impact, sales actually improved from the first quarter, driven in large by the Barbie brand.

Barbie saw sales increase 12 per cent and Hot Wheels a 21 per cent increase in sales for Q2. Together, they made up 18 per cent of the company’s quarterly sales.

Seeking Alpha reports that according to the NPD, Barbie was the number one for market share in the fashion dolls category over the second quarter. It was also the number one growth brand in the category.

In fact, Barbie has grown its sales on a year-on-year basis for three consecutive quarters – up four per cent in Q4 2017, up 24 per cent in Q1 2018 and now up 12 per cent in the second quarter earnings.

Mattel has continued to grow out both the Barbie and Hot Wheels franchises, repositioning Barbie across a number of growing spaces in the children's market including STEM learning, digital and SVOD programming and early learning. 

If Mattel can keep the Barbie and Hot Wheels momentum going, recovery will not be far behind, and while the firm has stated more impact from Toys R Us is still to come for 2018, 2019 should see this subside.

The company has confirmed that it is on track for its $650 million in cost savings that will ‘restore profitability and improve efficiency’.

Further to this, Mattel continues to make a play for the Chinese market; not only its toy market which saw a 2 per cent drop due to the market’s slowdown, but its $30bn early education market generated by China’s around 210 million children aged 0-10.

According to reports 26 per cent of disposable income is spent on kids’ education in China.  


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