Mattel(NASDAQ:MAT) has had a bumpy ride since reporting flat worldwide sales in July.

The company acknowledges that it is in a turnaround process, and there are some real questions as to the continued viability of some of its core brands. This has led to volatility with the stock, which was highlighted by its share price falling nearly 6% on Oct. 1 on top of a 10% decline in September, according to S&P Capital IQ data.

It was not one particular piece of news that caused the stock to fall, but the most recent weakness did occur after the company filed documents with the SEC regarding two top executives being awarded restricted shares and stock options. Not necessarily negative news, but the strike price of $21.06 raised some eyebrows. That number was perilously close to the $21.05 closing price for shares the day before the options/restricted shares were issued.

Source: YCharts

Not any one thing
The options/restricted shares issued to Chief HR Officer Richard R. Gros and Chief Brands Officer Juliana L. Chugg vest over three years. They are meant to be an incentive to stay at the company.

Setting the strike price so low, however, puts the shares in the money with relatively little improvement, and that, plus overall market concerns sent the stock down. It was an overreaction to news that is not essential to the company's results. The short and long-term prospects for Mattel will depend upon whether it can reinvent Barbie, American Girl, and MEGA BLOKS for a new generation.

Mattel has some changes to make
Owning brands like Barbie, Hot Wheels, Matchbox, American Girl, and Fischer Price has given Mattel many years of success. The problem is that those core brands no longer have quite as much appeal as they once did in a rapidly changing toy market. 

The company is in the process of modernizing those key product lines, but it has yet to be seen if it will be able to follow the lead of competitors like Lego and turn recognizable intellectual property into modern, growing brands instead of nostalgia plays with dwindling appeal.

Until the company proves it can do that, its stock is going to be sensitive to even the perception of negative news. 

Daniel Kline has no position in any stocks mentioned. He has done more than his part in purchasing his son much of the Hot Wheels collection. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.