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Mattel has been an iconic brand since its inception in 1945. With a global workforce of approximately 31,000 people, Mattel operates in 40 countries and territories and sells products in more than 150 nations.
But, in recent years, Mattel has fallen on difficult times as it tries to stem the tide and energize the proud brand. Margaret Georgiadis is Mattel’s new CE having assumed the company’s reins in early February after stops at Google, Groupon, Card Products, and Discover Financial Services.
Georgiadis is well aware of the task at hand and the brand’s rich history.
“Inspiring children through play and creativity is crucial to their early development and no company has done more in that space over many generations than Mattel,” she said after she was hired. “As a parent, I have seen this first-hand and am honored to be joining the company at this exciting time of renewed focus. I look forward to working with the incredibly talented people at Mattel as we build on recent momentum, leverage the unique creativity and passion that exists within Mattel to inspire future generations of children, and deliver on our promises to shareholders.”
Some of those promises include validating strategic initiatives, ongoing revitalization of core brands, the rebuilding of relationships with strategic license partners, accelerated growth in emerging markets, and a much more effective presence at retail.
During the company’s April 20 first-quarter earnings call, Georgiadis talked about her new role.
“I’m truly honored to lead this iconic company,” she said. “This is a company with a deep purpose to inspire the wonder of childhood as the global leader in learning and development through play. We have an opportunity to shape the next generation children that are more creative, collaborative, confident, resilient, and open to all life’s possibilities.”
Georgiadis spent the first 60 days on the job “deeply understanding what’s working well and where we must improve to deliver stronger performance and capitalize on our many opportunities. We’ve been undertaking a wide-ranging review of our business and are leaving no stone unturned as we look at actions to drive revenue, improve profitability, and create long-term value for our shareholders.”
First-quarter results came in below expectations. Gross sales in the first quarter were down 15 percent and gross margin came in at 37.9 percent.
“We view these results as unacceptable relative to what Mattel is capable of,” she said. “Going into Q1, which is a seasonally light quarter, we expected lower revenue and gross margin because of the retail inventory overhang coming out of the holiday period, a lighter entertainment slate, declines in our doll portfolio, a few foreign exchange adjustments, as well as some other factors. What we did not expect was a prolonged impact from the retail inventory overhang and the resulting slower pace of retail reorders.”
The lower-than-expected sales, she noted, “had a material impact on our ability to efficiently absorb our supply chain fixed costs. I should note that the retail inventory overhang was essentially isolated to North America and a few markets in Europe, while Latin America and Asia-Pacific continued strong growth. We decided to take action on a few ancillary brands to clean up our own inventory, and as a result incurred a higher obsolescence expense. Clearly, we are disappointed with our first-quarter results and recognize we have a lot of work to do to improve execution across our portfolio.”
Georgiades is, however, very encouraged by the company’s progress in revitalizing its core brands.
“POS, which we track at wholesale, shows Barbie, Hot Wheels, and Fisher-Price all continuing their positive trends in the first quarter,” she said. “I also want to be fully transparent about a few areas for improvement. For example, we have not fully regained the loss of momentum in American Girl and have a lot of work to do to capture the full potential of this incredible brand. And Monster High, which was in recent years a large and highly profitable business, continues to be a drag on our results. As the company’s new CEO, it is my responsibility to ensure we are clear about what’s working and what’s not working and ensure we effectively manage through these issues and set an aggressive, but realistic path forward.”
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