Are there cracks in the facade of Barbie's Dreamhouse?
Mattel's (MAT) second-quarter earnings report did not, on the surface, tell a pretty tale regarding the iconic fashion doll's global sales, which were down 12% for a fourth straight quarter of declines.
Mattel CEO Bryan Stockton noted that Barbie still reigns as the largest doll brand in the world, and its annual revenue is at around $1.3 billion. But the eternally youthful, improbably proportioned, always well-dressed Barbie, who celebrated her 50th birthday four years ago, may be showing some signs of fatigue.
On the plus side for Mattel, doll sales as a whole are "one of the fastest-growing parts of the toy industry," up 11% in the U.S. and 4% in Europe through May, Stockton noted. Yet Barbie, sold in some 150 countries, appears to be going in the wrong direction. What's behind it all?
The American Girls step up
In part at least, she's been hurt by competition within Mattel's own family, which also includes the Fisher-Price, Hot Wheels, Thomas & Friends and American Girl brands. The American Girl line specifically saw a 14% increase in sales during the same period Barbie dipped. The 18-inch American Girl dolls, which come complete with a back story and have both historical and contemporary versions, have been on the market since 1986 and a part of Mattel since 1998.
An even newer member of Mattel's Girls Portfolio, which drives around 40% of the company's revenue and grew by a total of 6% in the second quarter, has also seen big success in just three years of existence. That would be Monster High dolls, a line of "teen" characters designed to embody the offspring of famous monsters such as Dracula and Frankenstein. This group has experienced global "double-digit" growth and, according to Mattel, exceeded $1 billion in retail sales.
Mattel is also introducing a new line of dolls, Ever After High, which, Stockton said, the company hopes will reach "a segment of older girls untapped by Monster High."
So will the half-a-century-old Barbie be left behind as its newer, cooler sisters-in-plastic become the most popular girls in the class?
No, says Jaime Katz, an analyst at Morningstar who covers retail. “I think Barbie is fine. I think it’ll still be a plus-billion-dollar business.”
[Barbie isn't] fading," she continues. "I just think it’s becoming more difficult to grow revenues. When you think about growing that on one doll, it’s very difficult to do."
A digital push
Katz and Richard Gottlieb, CEO of Global Toy Experts, both say the huge Internet push of products such as the Monster High dolls may mean Barbie needs to step it up digitally to compete - first and foremost, she's not seen as a brand that's part of the technology culture.
Compare that with the digital campaign around Monster High, which included a partnership with Walmart (WMT) encouraging young girls to go online to read and watch videos related to self-esteem. The undertaking was "really a historic thing," says Gottlieb.
To that end, Mattel is planning a second-half push for Barbie that includes plenty of high-tech features. Among them: "Barbie’s Train and Ride Horse, which features gesture recognition software that reacts to Barbie’s commands; the new Barbie Digital Makeover product that transforms an iPad into a digital mirror … and the new Barbie Digital Dress doll that features LED and touch-screen technology allowing girls to design and customize Barbie’s fashions," the company says.
Mattel also appears unconcerned about any kind of devastating demise in the Barbie allure at this point. As Stockton said on the conference call, while Barbie is "likely being modestly impacted by [the success of its competition]," revenues through the first half of 2013 are still higher than in 2010, when the Monster High Dolls were introduced. Stockton also noted that at least half of the decline in North American sales for Barbie in the second quarter was related to a decision to shift promotions and related shipping of the product to the all-important second half of the year, which includes the holiday season.
"We expect to recapture that volume later in the year," he said.
Lacking cultural relevance?
As far as Barbie's cultural relevance in the face of newer and more innovative dolls, Gottleib does feel the classic doll may be lacking a bit in one area.
"Barbie’s not going anywhere; she’s going to be around a long time," he says. However, he also says she might not adequately reflect the multicultural modern world. While there are several versions of Barbie that represent several races and countries across the globe, Gottleib says that, when the Barbie brand is invoked, it's the blonde-haired, blue-eyed model that instantly comes to mind. "Forget the doll. Think about the brand," he says. "I think, in her DNA, she is essentially a statuesque blonde."
Dolls in the Monster High line, and in others including MGA Entertainment's Bratz line — the focus of a years-long intellectual property dispute between Mattel and MGA — are far more racially ambiguous, which Gottleib sees as a plus.
He adds that, in a world in which children are increasingly over-scheduled and inclined to stare at screens for hours at a time, the competition for older toy brands is naturally going to be fiercer.
“I don’t think there’s ever been a time in history when there’s been as much play supply as we have now," he says. "And there’s more supply than demand. I think children have less time and more competition for their time."
Tanya Lee Stone, author of The Good, the Bad and the Barbie: A Doll's History and Her Impact on Us, says the ever-increasing competition is sure to be a factor going forward. Even so, "I still think that, when you look more at how girls play, they often choose an object on which they can impose their own ideas and imagination," she says. "I think Barbie will always fit that bill."
What do you think? Has Barbie mania peaked or will young girls be playing with the doll 100 years from now? Please let us know via the comment section below.
- Consumer Discretionary