Barbie, her Dreamhouse, sparkly clothes, and smiling friends are set to shine on the big screen as of this weekend. That's as Barbie, the movie, premieres on July 21.
But this isn't a movie the for kids who generally rush through the toy aisle to snatch up the latest Barbie. Instead, rated PG-13, it targets those of us who once were kids -- and hold onto great memories of the always stylish doll.
If the movie isn't meant for those who usually play with Barbie dolls, you might have one big question: Will it even have an impact on Mattel (MAT -0.60%)? Let's find out what the release of this first live-action Barbie movie means for the toy maker -- and for sales of the world's No. 1 doll.
Image source: Mattel.
On the lookout for Barbie
First, just because the movie is aimed at an older crowd doesn't mean younger people aren't feeling the excitement. My 5 year old pointed out every Barbie movie poster we came across on a walk the other day -- and believe me, there were a lot of them. So even if kids don't go to the theaters to see Barbie, they're still likely to be on the lookout for anything related to the movie. And that equals a big opportunity for Mattel.
You can find dolls and accessories inspired by the movie at retailers such as Target and Walmart. Kids probably will ask for some of these -- even if they don't set foot in the movie theater.
Adults also may offer Barbie sales a lift. Mattel Creations, a website targeting collectors, already has sold out of many items linked to the movie. Adults may buy special edition dolls to add to their collections or other merchandise, like sweatshirts and visors.
In Mattel's most recent earnings call, the company said consumer product partnerships are a key to "unlocking the value" of its key brands -- such as Barbie. "Movie and content and digital gaming and extensions really give us the opportunity to broaden our reach, drive revenue, (and) monetize the brand as a franchise," said Chief Operating Officer Richard Dickson.
Barbie needs a lift
All of this is happening at a particularly good moment -- at a time when Barbie needs a bit of a lift. Yes, the brand still is among the top three revenue drivers at Mattel, along with Hot Wheels and Fisher-Price. But Barbie has been on the decline in recent times.
In the first quarter, Barbie worldwide gross billings fell 40% from the previous-year's level. This is the amount invoiced to retailers and doesn't include discounts or other adjustments.
Mattel said much of this decline had to do with high levels of inventory at retailers -- preventing them from ordering more -- and Mattel's shifting of its promotional activity. The company deferred most of its marketing to the time around the movie launch and beyond. Mattel predicts improvement in Barbie in the second quarter, an increase in momentum -- and growth for the full year.
Last year, Barbie accounted for nearly 25% of Mattel's worldwide gross billings. As a significant brand, an increase in Barbie sales could be a big plus for the company. Mattel says this year could be "legacy making" for the brand, thanks to the movie and related products.
Mattel's good news
All of this means the movie could usher in a new era of growth for Barbie. Meanwhile, Mattel has even more good news for us. The company says it's on track to reach annual guidance. And it's resumed share buybacks, a clear sign of confidence for what's to come.
Considering all of this, Mattel shares today look reasonably priced. They're trading for less than 20 times forward earnings estimates.
Mattel stock probably won't skyrocket as Barbie opens the doors to her world to us on the big screen. But the release could offer the brand a much-needed revenue boost -- and set the shares on the path to long-term gains.
