Mattel Continues to Struggle

In this segment from the MarketFoolery podcast, host Chris Hill is joined by Motley Fool Asset Management's Bill Barker to discuss Mattel (MAT -1.85%) closing its New York office. The move is part of a $650 million cost savings plan the toymaker announced last autumn. However, given the liquidation of Toys R Us, Mattel staging a successful turnaround is only going to be that much more difficult.

A full transcript follows the video.

This video was recorded on April 10, 2018.

Bill Barker is an employee of Motley Fool Asset Management, a separate, sister company of The Motley Fool, LLC. The views of Bill Barker and Motley Fool Asset Management are not the views of The Motley Fool, LLC and should not be taken as such.

Chris Hill: Let's move on to the news from Toyland. We'll start with Mattel, which is closing its office in New York. This is part of an overall plan intended to save about $650 million for Mattel. It's affecting about 100 employees. They're trying to move them to different places, so not necessarily layoffs, per say.

But, this seems like a supremely consequential year for the Mattel Corporation. They almost need to move even faster than they're moving right now, and if they don't significantly turn around their fortunes or have some sort of bright spot -- and that can come in the form of a quarterly report or something else altogether -- but, it's hard for me to see Mattel remaining a stand-alone public company for a whole lot longer unless they reverse their fortunes.

Bill Barker: In a sense, they have the safety net of Hasbro's (HAS -0.38%) interest out there, which I would assume is going to continue because of how much sense it makes for a combination, or really a takeover at this point, of Mattel by Hasbro. So, maybe they have a little bit longer, just in the sense that that's out there and it's something they can kind of rely on, to a degree, if the market conditions hold. We're still in a bull market. They wouldn't want to sell at a time where they had to sell.

New management there, they still think that they can turn this around, start cutting costs, and that may help them turn what has been losses. They lost $3 a share last year. Some of that was one-time costs, but also, their EBITDA was negative for the year, so, that's not a great sign. I think that, given what's going on with Toys R Us, it's made it that much harder, and I don't know what the bright spot is for them right now.

Hill: You mentioned Hasbro. Hasbro, for all of the success Hasbro has had, particularly with its tie-in with Disney, has hit a little bit of a stumble recently in the form of Black Panther, which is a movie that I think surprised some people in Hollywood with just how successful it was and how much money it made. Apparently, it also surprised the buyers at Hasbro, which had the rights to the toys. Apparently, there are no more Black Panther toys to be found. They sold out within just a few weeks of the film's release in mid-February, and Hasbro is kind of scrambling at this point.

Barker: Yeah, it's a good news, bad news thing.

Hill: It is the proverbial good problem to have. It's still a problem.

Barker: It's still a problem. And as you say, the degree to which this film has been successful has surprised people. It was a very good film. I saw it. You saw it, I assume.

Hill: Yeah.

Barker: I think over the long-term, this is going to be a very good-selling toy for Marvel and Disney and Hasbro, they all have a share in that. So, longer-term, good news. This is reminiscent, I guess, of the scene in Toy Story 2 where they took a jab at the toy sellers, within the movie, for not stocking up enough on Buzz Lightyear, which sold out after Toy Story originally came out.

Hill: Yeah, I believe it was Tour Guide Barbie.

Barker: Tour Guide Barbie.

Hill: Taking a shot at toy sellers and toy makers. Which, good for her, she was right on.

Barker: Also, we have time to recover for Christmas. It would have been a bigger problem, I guess, if Black Panther had come up in, say, October or November and had the success that it had, and you had as many people buying all their Christmas toys and there were no Black Panthers available. I think we have plenty of time.

Hill: It's one more reason to love Pixar, when the writers and directors of the movie throw in little nuggets like that, playing to the back of the room. "Here's a little joke that'll go over the kids' heads, but any parent who tried to buy a Buzz Lightyear after the success of the initial Toy Story and was not able to, here's a little something for them."