Barbie's greater diversity pays off for Mattel

(USA Today)--Barbie is proving that diversity — not just in skin color but body shape — can pay off, as Mattel's earnings showed Thursday.

Mattel's earnings were helped by having broadened its selection of Barbie dolls. Not only are they multiracial, but Mattel added new Barbies that represent a wider range of women's body shapes. As a result, Barbie sales jumped 16% compared to the same period last year. Mattel also saw good news with its American Girl line of dolls, where sales were up 14% for the quarter. That compares to a 2% decline in sales last year.

Barbie and American Girl helped power Mattel to net income of $236 million in the third quarter, up 5.3% from $224 million last year. Still, Mattel, fell below Wall Street's expectations of $244 million, according to analysts polled by S&P Global Capital Intelligence. Earnings per share also missed with Mattel reporting 68 cents per share. Wall Street was hoping for 71 cents.

Revenue came in slightly ahead of Wall Street's expectations at $1.8 billion.

Barbie's new Fashionista line made waves earlier this year as it expanded Barbie into three new body types as well as a variety of skin tones and hairstyles. The new line was particularly notable for helping reinvigorate the brand, both domestically and internationally. The brand actually grew internationally at its fastest rate since the first quarter of 2011, writes Jefferies analyst Trevor Young in a note to investors.

Last month, the toy maker announced it would be expanding its American Girl line into Toys 'R' Us and Kohl's locations.

While the expansion has already started taking place, Young notes that it may be too early to say the role it had in this past quarter. That said, it does bode well for the company's future.

"This is a meaningful improvement in distribution," says Young, noting that the expansion brings it into 1,100 Kohl's locations plus the close to 100 Toys 'R' Us stores. The company had previously relied on roughly 20 temporary stores during the year-end holidays and online sales.

Beyond Barbie and American Girl, Mattel also saw growth in a variety of other categories, including Fisher Price toys for young children and what it calls the "Wheels division," the toy cars that includes Matchbox and Hot Wheels. Both areas were up 6% in worldwide sales compared to last year. The Entertainment division, that includes Radica and games, grew 16%.

But it is the two doll lines that will be key for Mattel this holiday season particularly with increased competition.

Growth from Barbie and American Girl comes at an important time for Mattel. In addition to showing life to two brands which have struggled in recent years, they also arrive as Mattel looks for new growth after losing its license to sell Disney Princess products.

Rival Hasbro picked up the license earlier this year after acquiring the rights to it in 2014. Mattel's "Other Girls" division that previously was responsible for Disney Princess was down 50%.

Hasbro has the entire Disney Princess line on sale at the same time, a notable first for the line. Young, however, is still optimistic following the recent results.

The third quarter is usually a "good indicator of what trends are going to be," Young says. "I think seeing that positive point of sale momentum bodes well that there is that demand from consumers. It's not just filling shelves for the holiday season."

Mattel stock closed at $32.46, up 6% or $1.84 a share..


 

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