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, down 12% in a fourth straight quarter of declines. The leading toymaker, whose brands also include Fisher-Price, Hot Wheels, Thomas & Friends and American Girl, saw its overall net income drop by 24%, hit by the slide in Barbie sales as well as a $14 million write-down on its Polly Pocket line. Overall sales managed a 1% gain year-over-year, at $1.17 billion. Mattel shares sank 6.8% in the trading session following the report, closing at $43.16.
Does the recent losing streak in sales speak to fatigue regarding the eternally youthful, improbably proportioned yet always well-dressed Barbie, who celebrated her 50th birthday amid great fanfare four years ago?
As CEO Bryan Stockton noted on the analyst call, Barbie, which still reigns as the largest doll brand in the world and is sold in some 150 countries, has been hurt at least in part by competition within its own toy family. Doll sales as a whole, Stockton noted, are "one of the fastest-growing parts of the toy industry," up 11% in the U.S. and 4% in Europe through May.
The American Girl
And Mattel's own American Girl line saw a 14% increase in sales during the same period Barbie dipped. The 18-inch American Girl dolls, which come complete with a backstory and in both historical and contemporary versions, have been on the market since 1986 and a part of the Mattel family since 1998 (when its creator, Pleasant Company, became a subsidiary). An even newer member of Mattel's Girls Portfolio, which drives around 40% of the company's revenues and grew by a total of 6% in the second quarter, has also seen big success in just three years of existence. Monster High dolls, a line of "teen" characters designed to embody the offspring of famous monsters such as Dracula and Frankenstein, have experienced global "double digit" growth and, according to Mattel, have exceeded $1 billion in retail sales. Barbie's annual sales are at around $1.3 billion.
Mattel is also introducing a new line of dolls, Ever After High, which, Stockton said on the call, 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 more becoming 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 that the huge Internet push of products such as the Monster High dolls may mean Barbie needs to step it up digitally to compete, as it is not seen first and foremost as a brand that is part of the technology culture. The digital campaign around Monster High, which included a partnership last year with Walmart that encouraged young girls to go online to read and watch videos related to self-esteem, 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, including "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 for endless creative play with virtual make-up; and, the new Barbie Digital Dress doll that features LED and touch-screen technology allowing girls to design and customize Barbie’s fashions."
Mattel also appears unconcerned about any kind of devastating demise in the Barbie allure at this point. As Stockton said on the earnings 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. "But I think she will struggle as a white girl in a multicultural world." While there are several versions of Barbie that represent 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 — which was 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 also 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 to 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 but that, "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. I think Barbie will always fit that bill."