Barbie seems to be everywhere these days. The fashionable doll makes her big-screen debut this week.
Mattel (MAT -0.60%), which has marketed Barbie since 1959, is enjoying the hype over the new Barbie movie. And the toymaker's stock could be on track for its best performance in several years. Are Barbie dollars driving Mattel stock higher?
Barbie in the real world
In the land of make-believe, Barbie lives in her pink Dreamhouse and everything is, well, dreamy. It's a different picture in the real world.
Sure, Barbie continues to be one of Mattel's top products. Consumer research company Circana still ranks Barbie as the No. 1 doll property marketed globally.
However, Mattel reported that its net sales in the first quarter of 2023 fell 22% year over year. The primary culprit? None other than Barbie.
Gross billings for the Barbie franchise plunged 41% year over year in the first quarter. These gross billings reflect amounts invoiced to customers but don't include any sales adjustments due to discounts or other allowances.
Barbie wasn't even the top-selling product for Mattel in the quarter, which is unusual. Instead, the doll franchise came in a distant second to the company's Hot Wheels products.
Chief financial officer Anthony DiSilvestro said in the company's first-quarter call that Barbie's numbers were mainly the result of high retailer inventory levels. He also noted that the shift of promotions into the second quarter to align with the release of the Barbie movie had an impact.
Movie magic?
It's quite possible that the Barbie movie could give Barbie dolls a big boost. CEO Richard Dickson believes the live-action film could provide a catalyst that goes beyond just selling dolls.
Dickson said in the first-quarter call that the new movie has spurred "an incredible cultural conversation." He expects that it will "drive meaningful extensions of the [Barbie] brand outside of the toy aisle."
In particular, Dickson mentioned scripted and unscripted television, live experiences, mobile gaming, digital collectibles, and consumer product partnerships as areas where Mattel plans to take advantage of the renewed interest in Barbie.
There's a good reason to believe that Dickson could be right. Search engine traffic related to Barbie has skyrocketed over the last 90 days, almost certainly due largely to excitement about the upcoming movie.
It remains to be seen how successful the Barbie movie will be at the box office. Chris Nolan's highly anticipated biographical thriller Oppenheimer also is being released this week and could provide stiff competition.
However, the energy level surrounding the Barbie franchise certainly appears to be intensifying. Even if the movie isn't a massive hit, Mattel should benefit from increased sales of Barbie-related products in the second half of 2023.
The rest of the toy story
Mattel's fortunes don't hinge entirely on Barbie, though. The company markets a huge lineup of products, including American Girl dolls, Pictionary and Scrabble board games, and Fisher-Price toys.
The bad news is that most of these franchises also suffered in the first quarter because of high retailer inventories. The good news is that sales should improve.
Over the short term, Mattel could face challenges if the economy falters. However, its long-term prospects should be good. The toy industry has proved to be resilient. Mattel has one of the strongest product lineups in the industry. Its stock is more attractively valued than many others, with shares trading at a forward earnings multiple of around 18.7.
Mattel also has significant opportunities to expand into movies and other areas in a similar way that Marvel did. And Barbie is set to lead the charge.
