Mattel Is Singing Hello Dolly

Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

...well, hello, dolly. It's so nice to have you back where you belong.

                        (Hello, Dolly lyrics from Warner/Chappell Music)

That must be the sentiment at the corporate offices of Mattel (NASDAQ: MAT) as the company recently reported its first-quarter 2013 financial results. The company's American Girl brand (dolls, books, eBooks, clothes, accessories) led the way for Mattel, amid weaker performance from some of its other brands.

American Girl gross sales ($100.5 million) increased 32%. Investors should note Mattel's vision and philosophy for this brand. The focus of American Girl is to provide products and experiences that assist girls in growing up in a wholesome way. This is a mission that's essentially a counterpoint to much of what young girls are exposed to today.  

At the same time, Mattel's focus with this brand is to help girls (and yes, garner sales & profits for Mattel) while encouraging them to enjoy their all-too-brief time as girls. With a gross-sales increase of 32% for American Girl, do you think parents are listening to the message that Mattel's promoting with this brand?

Now, what's ironic for Mattel is that global sales for its Barbie brand were down 2% in the quarter. Barbie's taken some heat hotter than the curlers in her hair in the last few years because of her ultra-thin, picture-perfect look that some feel projects a distorted-female image to young girls. It is still a powerful brand, but there are some small chinks in Barbie's nail polish. Nevertheless, investors can take note that parents are still buying products for their children that are not always of the digital high-tech variety.

Mattel's worldwide gross sales for its other core brands, Hot Wheels and Fisher-Price, decreased 3% and 7%, respectively.

Mattel's worldwide gross sales for other girls' brands were up 56%. The strength of this growth was the company's Monster High brand. Overall, Mattel's global net sales increased by 7% ($995.6 million). For investors, the company's broad product assortment spread across storied as well as new brands has resulted in overall net sales growth – some weaknesses offset by newer brand strength.

On top of all of this, investors can take away that Mattel's board of directors declared a second quarter 2013 cash dividend of $0.36 per share. This represents an annualized dividend of $1.44 per share.


I like the statement by Mattel Chairman and Chief Executive Officer, Mr. Bryan Stockton, in an April 17 conference call. He said,

...although Easter, overall, is having less impact on our business, as we become more global and penetrate markets where Easter is not a significant toy industry promotion occasion.

Why is this a significant statement for investors considering Mattel? It's significant because the company, while beholden to seasonal sales, is aggressively looking beyond certain times of the year. Yes, the holiday seasons, are, and will continue to be, the bread and butter of enterprises in the consumer-goods sector.

However, Mattel, with its global strategy for growth, is positioning the company for greater "everyday" sales as well, which can help make those sales "valleys" less pronounced.

Competitive landscape

Hasbro (NASDAQ: HAS) has also experienced growth in its Girls category, and its international operations in newer markets are manifesting growth as well. Hasbro, like Mattel, sees the potential for even greater growth through innovative initiatives in the Girls category.

Company President and CEO, Mr. Brian Goldner, said in February,

In 2012, we achieved many important objectives for the year, including improving the U.S. and Canada segment operating profit margin to 15.1%, growing our games and girls categories and driving 16% revenue growth in the emerging markets while improving profitability.

Consider Hasbro Studios - the entertainment division of Hasbro. It's leveraging its media expertise to make film forays in the Girls category. It has collaborated with Screenvision and Shout! Factory on the feature-length film My Little Pony Equestria Girls, which will be released this month.

Investors should note that Hasbro can use this film and its partnerships with other companies to grow its core brands - the film portal for customers to offerings from the company's toys and games division. Hasbro Studios is currently developing a number of full-length films based on its popular brands, which should grow sales accordingly of those brands.

LeapFrog Enterprises (NYSE: LF) is a company fully embracing the digital world and seeing growth from its initiatives. The company's CEO, Mr. John Barbour, said,

…net sales of digital download content from our curated selection of over 475 titles, including LeapFrog-developed content and content from 30 media partners, were nearly four times the prior year as families took advantage of our 24x7 online App Center.

In addition, LeapFrog CFO Mr. Ray Arthur earlier said:

We are excited about our market-leading portfolio and new product launches for 2013, including a new learn-to-read system, new iPhone and iPad app activity products and new LeapPad tablets.

LeapFrog looks to hop over the competition through directing its digital products to the overall one-to-nine year-old age group. The company has educator-approved applications (apps) for the iPhone and iPad for children in the specific two-to-nine age group.

The company is getting them while they're young - those children who often can sway their parents into buying them the latest and most innovative educational toys of the digital variety. Investors should consider a company that's at the forefront of the digital revolution as applies to this market segment.

It's important to consider those traditional toys and games companies marketing those iconic traditional products to children, while not ignoring the promising ventures of companies with a core focus on the newer digital medium.

Bottom line

What can investors take away from all of the above? My personal choice would be Mattel; it has a history of getting the most mileage out of its storied brands while always innovating in the marketplace with brands such as American Girl. However, don't discount Hasbro's aggressive film initiatives to keep the spotlight on its brands and the digital initiatives of LeapFrog as it negotiates the new toys and games paradigm of the 21st century.

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Michael Ugulini has no position in any stocks mentioned. The Motley Fool recommends Hasbro, LeapFrog Enterprises, and Mattel. The Motley Fool owns shares of Hasbro and LeapFrog Enterprises. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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