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Barbie's World: Can Mattel Survive as Competition Gets Hotter?

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After cutting 2,200 jobs as part of an initiative to improve profitability and productivity; reporting a major loss in share price; and falling revenue, Mattel (MAT - Free Report) is in some serious trouble. The toy manufacturing company released its quarterly report yesterday and shortly after, experienced a drastic almost 9% slump in its share price.

This leads us to the question whether or not the current generations of kids still play with Barbies and Hot Wheels, or if they are just fine staring at a phone screen the whole day.

Where Does the Toy Industry Stand Today?

Before there were online retailers like Amazon (AMZN - Free Report) or ebay (EBAY - Free Report) , physical toy stores were every kid’s dreamland. However, in the past, the influence of technology and e-commerce has resulted in a shift of where demand lies for toys.

According to analysis done by Jumpshot Inc., Amazon was responsible for more than 83% of sales for top toy brands like Lego, Mattel and Hasbro (HAS - Free Report) . On the other hand, Toys R Us accounted for only 12% of sales online. Not only have these online retailers pushed brick and mortar companies out of the way, but they also have a foothold on the future of the toy industry.

Although Mattel reported a loss in its share price and revenue, it saw an increase in gross sales of 12% and 21% for Barbie and Hot Wheels, respectively. And even though toy companies have felt sudden pressure after Toys R Us stores closed down, Hasbro reported a better than expected quarterly report recently. Although revenues were down for both Mattel and Hasbro, they are consciously making an effort to remain on the forefront of this industry.

What Does This Mean For Mattel?

Even though the company reported an increase in sales for Barbie and Hot Wheels, two of the most popular Mattel products, it is risky to be dependent on the hope that the company will do well in the future. With losses for four straight quarters, it is hard to determine whether or not Mattel has been left in the dust compared to its competitors.

According to a UBS analyst, there has been no evidence of industry structural declines; therefore, any market share losses that Mattel has incurred are self-inflicted. The toy industry is a global industry worth billions of dollars, so on its own it is doing quite well. The struggles, or sometimes even successes, come from the individual companies within this industry.

Other Toy Companies

Other global toy companies such as Namco and LEGO have been doing extremely well within the industry. According to Statista, worldwide revenue for Namco alone was around $6.40 billion in 2017. LEGO has seen changes too after they regained a surge in revenue in 2015.

Bottom Line

Mattel has cut jobs and is closing its factories in Mexico in order to cut costs. It’s apparent that as an individual toy company, Mattel is struggling. However, the industry as a whole still seems to be intact. As of now, we can only look towards how the company will react after a loss of workers, as well as how the company will deal with outsourcing manufacturing its products. There could be potential changes to the way Mattel will function in the future and this could either end up in a good or bad way.

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We are reissuing this article to correct a mistake. The original article, published on July 27, 2018, should no longer be relied upon.


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