What happened

Shares of Mattel (NASDAQ:MAT) gained 18.5% in value last month, according to data provided by S&P Global Market Intelligence. Mattel stock has underperformed the broader market over the last year, down 25.6% compared to the S&P 500 loss of 1.13%. 

The stock rebounded in January along with the broader market, but there was also news that Mattel is moving forward with its plans to turn some of its top toy franchises into movies to drive growth.

A young boy looks at a tablet computer while lying on the floor with toy cars scattered around him.


So what

Mattel is currently in turnaround mode. The company's third-quarter earnings report in October showed encouraging signs that management's strategy is working. Gross sales in North America increased 6% year over year -- the highest sales growth in 11 quarters. While some toy brands, such as Thomas & Friends and Fisher-Price, have struggled to grow, Hot Wheels and Barbie have performed well lately. 

Additionally, management sees an opportunity to unlock more value from its top brands through movies, TV shows, digital gaming, live events, and consumer products. The company formed a new division called Mattel Films to oversee the company's movie projects. 

In January, the company announced that Warner Bros. would be a partner in making a live-action Barbie film. Warner Bros. will also help Mattel make a live-action version of Hot Wheels for the silver screen. 

Check out the latest Mattel earnings call transcript.

Now what

Mattel is following in the footsteps of its rival Hasbro in these efforts. Hasbro has had success over the years branching out to movies and digital games with its top toy brands. Given that Hot Wheels and Barbie are two of the most popular toys in the industry, these movie projects could prove significant in turning the company's fortunes around.

Even if the movies don't turn a profit -- something many movies struggle to accomplish -- the buzz and marketing around the Barbie and Hot Wheels movies should translate to higher sales of the toys.

In a statement, Mattel CEO Ynon Kreiz said, "Mattel Films is on a path to demonstrate the enormous potential of our brand portfolio, as we continue to execute on our strategy of transforming Mattel into an IP-driven, high performing toy company."