At the rate it's going, Mattel (NYSE: MAT) isn't going to have any toys to sell this holiday season. For the third time in just over a month, the toymaker has announced another major recall, this time of 800,000 toys. Most troubling is that it involves accessories for Barbie dolls, Mattel's biggest seller.
Since its Fisher-Price first announced a recall on Aug. 2, the company has had to recall more than 20 million toys.
Mattel previously warned that there might be more recalls in the offing, so we probably haven't heard the last of them from the toymaker. The company has initiated new screening and testing programs for its toys, and it has also begun investigating the Chinese factories that manufacture them. There was a full-page ad in The Wall Street Journal today saying that Mattel takes their "promises seriously" and highlighting the three-point program its toys now undergo.
- All paint is to be tested before it's used on the toys without exception.
- Every stage of production is subject to testing and unannounced. inspections.
- Every production run of finished toys is now tested.
Part of its image problem, however, results from clashes the company had with the Consumer Product Safety Commission over how timely the company has been in reporting problems. The company admits that it flouts the law requiring that serious issues be reported within 24 hours because it finds the law unreasonable. It's been fined twice for "knowingly" withholding information from the agency.
While Mattel was enjoying a reputation of having strict safety standards, it might have been able to use that rationale, but its third major recall has the company's name in tatters and raises questions about corporate hubris. It seems the company has yet to be humbled or chagrined into compliance.
Right now, Mattel is facing a crisis of monumental proportions for both its brand and its bottom line. The costs of the recalls still have to be calculated and will probably extend out for many years, particularly from lawsuits that will linger on. Of more immediate concern is the coming Christmas holiday and convincing consumers that its products are safe.
Mattel isn't alone in the recall category, as rivals Hasbro (NYSE: HAS) and RC2 (Nasdaq: RCRC) have also initiated recalls. And many other companies outside the retail world are being negatively affected from China's tainted goods. Yet the size of Mattel's recalls and the fact that they continue to crop up every few weeks are a concern.
If there's a silver lining to the clouds hanging over Mattel, it's that it gives the appearance that the processes it put into place are working. It's also getting the issue out of the way now, assuming there are no -- or few, anyway -- additional recalls in the works.
Resolving the matter publicly now, and displaying appropriate contriteness over the mess, can help Mattel salvage its reputation along with the holiday shopping season.
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