Mattel unveils its strategy for its next leg of growth
Mattel Barbie dolls are displayed in Tiskilwa Illinois U.S.A. for an image on Monday, April 16 2018.
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Its toy business is now on a stronger footing MattelFriday, the company stated that they are looking at expanding their presence in other areas like filmmaking, digital gaming and apparel.
This strategy, the toymaker believes, will enable it to appeal to consumers’ love for Hot Wheels, Barbie and Uno toys and offer new experiences for children and adults.
CNBC interviewed CEO Ynon Khreiz, who stated that “the first part of the turnaround consisted in restoring and then improving profitability.” To ensure that our toy business is on a strong foundation, and improve our balance sheet. This is our focus. We have always stated that mid-to-long-term was the time when we could capture the full value of the company.
Mattel will present this strategy to analysts in a pre-recorded presentation on Friday. It is a playbook that many others in and outside of the toy industry have used — take beloved franchises and make them available to consumers across multiple segments.
The strategy is proven successful. Providing new entertainment content — like movies, television shows or video games — keeps the brand in the cultural zeitgeist, and helps fuel sales of a variety of items, from apparel to housewares.
Barbie is a great example. Barbie has been on the toy shelves more than 60 year and still posted its highest full-year sales in 2021.
Richard Dickson of Mattel’s president and chief operating officers stated to CNBC that Barbie was a case study in excellence and demonstrates the endless potential of each girl. We’ve taken that brand purpose seriously and have managed Mattel to reflect it in all that we do.
Mattel launched Barbie dolls with more than two dozen ethnicities, and a greater variety of bodies five years ago. Mattel also launched new Barbie doll lines, which celebrated the real-life women of Zendaya, Bindi Irwin (animal activist) and Misty Copeland (dancer). It also offered expanded career opportunities in science, politics, business, and other areas.
Dickson stated, “Evolution is what makes a brand valuable. But purpose is what makes it immortal.”
Mattel wants to innovate the Barbie brand with a live action film featuring Margot Robbie, helmed and directed by Greta Gerwig. The company will also continue to produce animated Barbie specials as well as new merchandise for digital and retail stores.
This strategy is rivaled. HasbroIt knows very well and has come under scrutiny for its use.
On Wednesday, activist investor Alta Fox Capital ManagementHasbro owns 2.5% of the company. Hasbro sent shareholders a letter stating that it would nominate five directors for its board. Alta is urging Hasbro to spin off Wizards of the Coast and digital gaming, its fastest growing segment, and asking the company to reevaluate its strategy of using entertainment to drive toys sales.
Hasbro, like many other companies, has resisted the suggestion that its current strategy was not effective and hired analysts. Hasbro’s Wizards division, including brands such as Magic: The Gathering or Dungeons: Dragons, could help it weather the storm of losing its business. DisneyMattel has a princess license for Mattel. This is an extremely lucrative licensing opportunity in the toy business.
Mattel’s strategies have been well received by investors. Since the start of this year, shares of Mattel have increased by more than 15%. The stock reached a 52 week high of $25.71 per shares on Thursday. Shares were down less than 1% Friday.
Mattel’s average target stock price is $30.96. That is approximately 24% According to FactSet, you can gain by trading where it is currently traded. Linda Bolton Weiser (an analyst at D.A. Davidson is more positive than ever. On Monday, she raised her price target from $38 to $45 in order to take advantage of the growth potential over the next years.
Mattel’s revised sales predictions have fueled her optimism, which predicted a growth rate of 8-10% in 2022 and an even higher single-digit pace for the year following.
Mattel’s outlook depends on the expected sales growth at its toy company, but it will also benefit from its post-turnaround strategies.
The toy business has already seen great success. partnering with French fashion house BalmainTo create ready-to wear fashion and accessories collections, it offered three exclusive Barbie nonfungible tokens for auction.
Mattel has been a partner in the past with General MillsL’Oreal NikeTo produce limited-edition products that are based on the company’s intellectual property. Kreiz stated that the company will continue to explore this market. Kreiz said that the company is exploring opportunities for immersive brand experiences in retail stores.
This strategy is not just about driving revenue; it also complements the company’s toy offerings by offering a way for its customers to connect with their brands.
Digital entertainment — including video games, mobile games and NFTs — are another opportunity.
Mattel’s digital gaming industry is worth $170 billion, according to the company. This market has just started to be explored by Mattel. Mattel has already launched mobile games that are centered on Uno and Phase 10, as well as Hot Wheels Unleashed racing game, but it is keen to grow this segment of its business.
The launch of digital games, such as Magic: The Gathering Arena by Rival Hasbro, has had significant positive effects on the company. Its Wizards of the Coast division and its digital gaming unit made up 20% of the company’s revenue in 2021.
Mattel also has an interest in NFT.
Dickson stated that it was a great opportunity to increase engagement with iconic brands. Dickson said, “I believe what sets us apart in the NFT market is our global recognition of iconic brands. With the right interpretation and execution it can be incredibly thrilling and incredibly value.”
Hot Wheels, the largest toy manufacturer in the United States, was the first to enter the NFT market. They created three exclusive NFTs that were inspired from the Hot Wheels Garage Series. These NFTs are highly desired by collectors. Dickson explained that another collection with more than 90,000.000 NFTs was sold in no time and there were still tens or thousands of people waiting online to get them.
Mattel has the ability to reach out to older generations by exploring other market segments. Mattel can target consumers who have grown up Barbie but don’t want to buy traditional collectible dolls. This allows Mattel to maintain the brand’s status and give them agency for purchases of limited-edition items.
The flywheel that combines toys, entertainment and consumer products with digital is often a revolving door. To illustrate, Barbie toys are a source of entertainment content that then drives sales.
Mattel’s film division was established in 2018 but it will not release any feature-length films in cinemas before 2023.
The company will begin production this year on its Barbie movie with Warner Bros. as well as a Masters of the Universe movie with Netflix. A dozen other projects are in the works, including movies based on Hot Wheels and Magic 8 Ball as well as Major Matt Mason’s Rock ‘Em Sock ‘Em Robots and Uno.
Its fledgling film business strategy is to rely on third-party firms to finance every project, and to partner with distributors and studios. It helps reduce the company’s risk financial. Mattel doesn’t have to be hands-off with these projects.
Kreiz explained that they are creatively involved to make certain the brand’s DNA and attributes are present. “We don’t work as film financiers or distributors. We only collaborate with the best.”
Kreiz is a media and entertainment veteran with more than 20 years of experience, focusing on children’s entertainment. Kreiz was the CEO and Chairman of Maker Studios from 2001 to 2014. The studio was then sold to Disney. Before that, he served as the Chairman and CEO at Endemol Group. Endemol Group is one of the most important independent production companies worldwide.
Mattel Inc. Hot Wheels Brand Matchbox Cars are set up for photographs in Tiskilwa (Illinois), U.S.A. on Monday, April 16, 2018.
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Mattel plans to have over a dozen specials and series on television networks this year. Kreiz explained that it has about 20 projects currently in production and 25 under development.
He stated that this opportunity was not created to make more toys. When we create a TV or movie, our mandate is to produce great content and to attract creative talent.
We know this is a project that will bring us good results,” he said. We will sell more toys but that’s not our initial goal. We are committed to creating great experiences, content, and entertainment that people enjoy.
Kreiz cited Lego and Disney’s Marvel to illustrate companies that have taken similar steps to produce quality content. This brand reimagines itself and energizes consumers. These projects have resulted in strong merchandise sales for Lego and Disney, both of which have been critically acclaimed.
Mattel’s current projects have attracted some big talents, such as Tom Hanks in Major Matt Mason and Vin Diesel in Rock ‘Em Sock ‘Em Robots.
These are former fans who were partners [of Mattel’s brands]He replied, “Yes.”