After a less than impressive 2016 holiday season, toy manufacturers were faced with some difficult choices headed into 2017. After a steady stream of low-selling months for top toy names such as Barbie and Fisher-Price, Mattel went and found a new CEO. But, this time, out with the old and in with the new, hasn’t made much of a difference.
CEO Margo Georgiadis came in with much fanfare and very high hopes, but fresh ideas at the top helped very little, as Mattel stock dropped 11 percent last week.
The problem, one that Georgiadis and her team must address sooner rather than later, is that kids just aren’t as interested to play with toys once considered timeless. Barbie isn’t selling. Neither is American Girl. Even perennial top sellers like Mega Bloks are not moving off shelves like they were a few short years ago. In fact, sales in the first quarter dropped about 15 percent, not an auspicious showing for the former Google executive who came in with big plans and promises to turn things around.
Now, in speaking to CNN, Georgiadis blamed “retail inventory overhang” for the poor showing. In other words, the company had too many toys leftover from Christmas. They didn’t sell then, and they’re not selling now, so there’s no way to bring in new products and try to pop the market.
But that’s not precisely fair, according to most market watchers. Mattel has been struggling for years for one reason that’s very clear to just about anyone not already working at Mattel: kids don’t want their toys. Mega Bloks were down 38%, American Girl dropped 12% and Barbie, that quintessential American toy, fell 13%.
It might be tempting to blame changing play habits – i.e. video games or mobile devices – for the drop-off. There might be some truth to that, but the more real truth is that kids just aren’t choosing Mattel toys … or at lease parents aren’t choosing Mattel for them. While Hasbro hasn’t had the best couple of quarters from a PR perspective, shares are up 25% so far in 2017 and, according to CNN, up 75 percent over the past few years. In the same time span, Mattel dropped about 40 percent.
Taken as a head-to-head comparison, it’s clear that both customers and Wall Street believe the problem is at Mattel, not in the segment.
So, what can Mattel do? They need to reconnect with their customer base, find out what today’s kids want and today’s parents are ready to buy. That could mean big changes in product line … even including depending less on … You Know Who … but it might come to that. Mattel can’t afford to keep dropping as its rivals thrive.