Mattel, Inc. (MAT - Free Report) recently entered into an agreement with AT&T Inc.’s (T - Free Report) Warner Bros. Pictures Group to work on a live-action feature film. This latest move is aimed at bringing the popular Barbie franchise to theaters. In the film, Academy Award-nominated actress Margot Robbie to portray as Barbie. Robbie will also co-produce the live-action feature film along with Tom Ackerley and Josey McNamara under her LuckyChap Entertainment Banner.
Following the news, shares of the company gained 4.7% yesterday. However, in a year’s time, the stock has lost 25.1%, wider than the industry’s 19.3% decline.
Notably, this is the first partnership between Mattel's newly-established Mattel Films and Warner Bros. Pictures. Chairman and CEO of Mattel, Ynon Kreiz, had previously said that he wants to bring the struggling company back on the growth track. We believe movies are one of those paths, which will help the company revive its performance.
Ynon Kreiz stated that “Mattel Films is on a path to demonstrate the enormous potential of our brand portfolio, as we continue to execute on our strategy of transforming Mattel into an IP-driven, high performing toy company.”
Why Partnerships are the Need of the Hour
The U.S. toy industry was dealt a heavy blow when the country’s largest independent toy seller, Toys "R" Us, filed for bankruptcy. Leading U.S. toymakers like Hasbro, Inc. (HAS - Free Report) , Mattel and JAKKS Pacific, Inc. (JAKK - Free Report) were severely affected by the setback as a considerable portion of their revenues were generated from sales to Toys "R" Us.
Also, Mattel’s net revenues had declined over the past few quarters due to the liquidation. Consequently, sales slumped across every brand under Mattel. We believe the effect of this liquidation will linger further. That is because Toys “R” Us, the last major chain fully dedicated to selling toys and the overall industry, is expected to grow at a much slower pace for quite some time now.
Further, in recent times, toys by themselves seem to have lost their charm and need a story to appear relevant to kids. In this scenario, the success Barbie might help Mattel build interest for the movies and its merchandise. Additionally, with children’s shifting toward video games and personal electronic devices, toys and video games related to popular movies and gaming franchisees are doing well.
This Zacks Rank #3 (Hold) company’s consistent efforts to improve its point of sale while managing its costs coupled with strategic partnerships and expansion in international markets too bode well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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