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Will Mattel's Global Franchise Management Group Revive Sales?

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Mattel, Inc. (MAT - Free Report) , like most other traditional toy makers, has been bearing the brunt of soft consumer demand and a sales crunch. In an effort to navigate such challenges, the company has launched Global Franchise Management Group. This division will be overseen by Janet Hsu, a veteran children's entertainment executive who will bring her extensive leadership experience to the table.

The new division will focus on expanding the company’s brand in content development and distribution, consumer products, live events, digital gaming as well as strategic partnerships. Since the U.S. toy market is somewhat saturated, toy companies are exploring opportunities abroad. International markets offer greater potential based on the pace of economic growth that they currently enjoy. Mattel has been seriously focusing on accelerating its presence in Europe, Latin American and Asian countries.

We believe Mattel has been one of the early movers to gauge the impact of Toys “R” Us bankruptcy amid peers. The U.S. toy industry dealt a heavy blow when the country’s largest independent toy seller, Toys "R" Us filed for bankruptcy last September. Adding to the concerns, Toys “R” US said that it is liquidating its entire U.S. operation, leaving toymakers like Hasbro, Inc. (HAS - Free Report) , Mattel and JAKK Pacific (JAKK - Free Report) in a soup as these used to derive a considerable portion of their revenues from sales to Toys "R" Us. Although retailers like Amazon (AMZN - Free Report) came to the rescue of these toymakers, they currently don’t have shelf spaces as big as Toys “R” Us, which is a concern.

In fact, owing to the liquidation, Mattel’s net revenues in the second quarter of 2018 declined 15% year over year on a constant-currency basis. It also led to a sales slump across every brand under Mattel. While we appreciate Mattel’s relentless efforts to chalk out counter strategies and adapt to changing demand conditions, we remain apprehensive about the fact that the company has not been able to revive sales yet.

Meanwhile, a look at Mattel’s stock price movement gives an indication that the stock has witnessed an unimpressive run on the bourses in the past year. Shares of the company have lost 6.3% against the industry’s rally of 6.7%. This reflects investors’ pessimism on the stock, given an uncertain sales environment.



Mattel carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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