After one week with a new chief executive, Mattel Inc. is already stepping into new territory — partnering with Chinese e-commerce giant Alibaba to design products for China and announcing its first male American Girl doll.
The El Segundo toy maker said Tuesday it will sell items through Tmall.com, Alibaba’s sprawling online marketplace. Mattel will also work with the Chinese tech giant's artificial intelligence lab to develop “innovative products” to nurture childhood development.
It's the first public move by Margo Georgiadis, a former Google executive who took over as CEO last Wednesday. In another splash, Mattel announced it will add a boy character for the first time to its American Girl line of dolls and accessories.
In a Tuesday statement, she said China presents a big opportunity for Mattel.
"The multibillion-dollar toy category in China is highly fragmented, with tremendous potential for growth,” she said. “Working with Alibaba, we see a terrific opportunity to develop and lead the category."
Partnering with Alibaba offers insights into the Chinese market that Mattel would otherwise not have, analysts said. The company will also be making this aggressive push into China just a year after the country ended its one-child policy.
“Obviously the potential in China is huge,” said Gerrick Johnson, equity research analyst at BMO Capital Markets. “Just the sheer number of children in China you can address.”
Georgiadis is coming in at a crucial time of turnaround. The company has been overhauling its culture, which has been mired in recent years in red tape, and reviving sales at core brands including Barbie and Fisher-Price. The hiring of a leader with Silicon Valley experience is a sign the toy maker is making a big play for technology as the future of the toy industry.
Many analysts said that Mattel is heading in the right direction, but has suffered some bumps along the way. After a lackluster holiday season, the company reported in January that its fourth-quarter sales and profit missed estimates. That is in contrast to rival Hasbro, which beat expectations.
“From a strategic standpoint, everything they are doing is the right thing,” Johnson said. “The product is so much better. The culture is so much better.”
However, Mattel was probably hampered during the holiday season, dealing with retailers that were less eager to heavily stock its products after years of unimaginative offerings. The company probably had to pony up extra money to get better placement at stores.
“Mattel was coming from a position of weakness versus Hasbro, which has been performing well for the last three years," Johnson added. “They have to do more to convince retailers to take their product.”
The loss of the doll licenses to Disney’s blockbuster film “Frozen" and its princess properties to rival Hasbro last year has also dealt the company a big blow. Analysts said those brought in more than $300 million a year for Mattel, and their absence left a major void.
“The toy-making business, particularly now more than ever, is about hitching your wagon to the biggest name out there,” said Jason Moser, a toy analyst at the Motley Fool. “Disney is the brightest star out there.”
Mattel has focused on rolling out new products that speak to a more diverse audience. Last year, Barbie got a whole lineup of new dolls with new body shapes, skin tones and eye colors.
On Tuesday, the company said it is launching its first-ever boy character, a drummer named Logan Everett, under its American Girl brand.
Industry watchers were skeptical that one new doll would make any difference to the bottom line. But it does add to Mattel’s reputation as a company actively trying to embrace a wider swath of kids and parents.
“It’s not going to be a needle mover,” Moser said. “Perhaps they felt that introducing a boy to the mix could open up that market,” which is almost exclusively female.
As a toy novice, Georgiadis is expected to bring changes to Mattel (the new toy, however, was likely in development well before the new CEO was chosen).
But her initial appointment, followed by the report of Mattel’s poor holiday season, added to the uncertainty about the company’s immediate future, analysts said.
Some experts think that she could bring a badly needed fresh perspective to an industry already grappling with huge changes in the way children play.
“At this point in the game, Mattel was in need of a total outsider," Moser said. “Number one, she is female, but also a female in tech. I think you are hitting a really tremendous one-two punch there.”
No comments:
Post a Comment