Source: Sports Illustrated
Is Mattel (MAT 3.16%) up to another publicity stunt, or is it a wise move? Following disappointing fourth-quarter results with sales of its iconic Barbie brand down 13%, the toy maker is attempting some rather bold moves.
Backlash Barbie
As the controversy rages on over Barbie appearing in the Sports Illustrated swimsuit issue and the further objectification of women to young girls that it can create, Mattel is enjoying the temporary boost to its top and bottom line. The Sports Illustrated Barbie's "limited edition" is reported to have sold half its inventory in the first two days, with people reselling them on eBay for much higher prices.
Apparently, in today's Miley Cyrus world there is no such thing as bad publicity. Publicity sells.
Mattel spokeswoman Michelle Chidoni has been quoted as saying the company is "unapologetic" about the association with Sports Illustrated. That's an interesting choice of words.
I'm somewhat reminded of the controversy of the pregnant Midge Barbie of the "Happy Family" set back in 2002. Mattel is certainly no stranger to controversy.
The controversy at that time, with claims that it was promoting teen pregnancy, got so fierce that Wal-Mart pulled it off its shelves.
Entrepre-what?
When CEO Bryan Stockton on the Jan. 31 conference call said, "We are working on innovation, particularly on Barbie," he wasn't kidding. Meet Entrepreneur Barbie, possibly the first Barbie doll with a name most its three-to-twelve year old customers can't even pronounce. Is Mattel hurting that much for publicity?
True, this is Entrepreneur Barbie. It's business Barbie. She's not pregnant nor is she in Sports Illustrated. The buzz may not be the same, but the dolls are designed for girls between 3 and 12 years old. They don't even know what the word entrepreneur even means. They prefer doctor, chef, zookeeper, baker, or even waitress. Heck, I did when I was that age, and I didn't know what the word entrepreneur meant until I was in high school.
Entrepreneur Barbie sounds like a target for teens which is outside Mattel's target market. It's hard to imagine this Barbie will be appealing as a toy. After all, when was the last time you asked an 8-year-old what she wanted to be when she grows up and she said, "I want to be a corporate executive."
Barbie will be back...right?
Mattel knows it has to come up with something, or many things, to revitalize its Barbie brand. After all, over half of its sales each year for the entire company are due to the Barbie line alone. And if history is any guide, Barbie will be back with a vengeance.
You might not believe it, but five years ago Barbie went through a period that was described as "massively outsold by rivals." Not surprisingly, Mattel upset some parents again by introducing a tattoo'd Barbie. At the time, Mattel saw several consecutive years of declining sales. For 2008 alone, Barbie sales plunged by 21%.
But she came back. In 2009 Barbie sales bounced back 12%. In 2010%, they jumped another 8%. In 2011, it tacked on another 6% which meant Mattel erased all of Barbie's 2008 decline and then some for that year. Weakness in the Barbie brand has happened at certain times in history but doesn't necessarily mean a permanent long term trend.
Has-not-just-bro
No doubt Mattel is feeling some pressure from Hasbro (HAS 1.14%) as well. The rival toy company saw its girls product category explode by 26% last year to record levels of over $1 billion for the first time. It was the sixth straight quarter in a row of growth for Hasbro's girl products.
Hasbro launched the movie My Little Pony: Equestria Girls which helped contribute to its success in a big way. It is planning to release a sequel later this year as well as a slate of other movies. This is causing competitive pressure on Mattel from Hasbro and may be resulting in Mattel scrambling to innovate and stir up controversy in response.
Innovation sells even better than controversy
Stockton pointed out that the Barbie Dreamhouse this past holiday season was the no. 1 selling Barbie item in history. This was despite it being a $150 toy, suggesting that price and the economy aren't a show stopper for Barbie. He said it was due to the "gotchas and gimmes that it has," and "it sold extraordinary well because it was an innovative product."
Meanwhile, the new doll sports a smartphone, tablet, and a brief case. What does that even mean? Is that what an entrepreneur looks like? Will kids really understand?
3 to 12 year olds may be more interested in the smartphone, tablet, and briefcase Barbie if they were interactive.
Sure, they're trying to show the modern, independent, educated and successful woman, which you can certainly appreciate. But kids between 3 and 12 years old either want something interactive or they want an easily recognizable and a fun role model they can aspire to. Few 8-year-olds say, "I want to be a software engineer in charge of my own social media company." Maybe Mattel expects them to start aspiring differently.
Foolish final thoughts
In the end, it sounds like Entrepreneur Barbie is 100% about pleasing the parents, but long term it's the kids that drive demand. Mattel should stick to focusing on its real customers, the kids, and less so on what looks like adult or teen-targeted product lines. If it focused more on designs and ideas that made the Barbie Dreamhouse a 55 year record-selling product, its overall Barbie line may have been up 13% in sales instead of down 13%. Going forward, keep an eye on just that. Perhaps the Barbie Dreamhouse will act as a wakeup call for management, and they'll start acting more like "entrepreneurs" again themselves.
