Mattel, Inc. MAT entered a three-year international licensing agreement with Illumination and Universal Brand Development for the Despicable Me franchise. The company’s licensing rights in North America and international markets comprise action figures and dolls, play-sets, vehicles, radio control toys, games, plush, role-play and accessories.
Mattel is also slated to launch a multi-category collection by Illumination's upcoming Minions sequel. The collection will be launched by retailers worldwide during the global theatrical premiere in summer of 2020.
The above move is in line with Mattel’s efforts to revive brand image and drive persistently falling revenues. To this end, the company also recently partnered with AT&T Inc.’s T Warner Bros. These partnerships are likely to drive Mattel’s sales over the long term.
Shares of Mattel have gained 11.2% over the past six months against the industry’s collective decline of 25.4%. The share price appreciation can be attributed to the company’s robust point of sale momentum. Further, partnerships and expansion in international markets bode well for Mattel.
Why Partnerships are the Need of the Hour
All of Mattel’s recent strategies hint at the company’s unremitting aim of reviving sales and form the business in a way that would ensure a new organization design, capable of bringing positive transformations and building capacities.
While we appreciate Mattel’s efforts to chalk out counter strategies and adapt to changing demand, we remain apprehensive about the fact that the company has not been able to revive sales yet.
Mattel, like Hasbro HAS and JAKKS Pacific JAKK, is expected to keep shouldering the Toys ‘R’ Us liquidation effect in the near term. In fact, owing to the liquidation, Mattel’s net revenues in 2018 declined 7% year over year on a constant-currency basis. It also led to a sales slump across most brands under Mattel.
We believe that the above strategy will help Mattel engage on a deeper level with consumers, thereby, driving sales. The company, as it is, relies heavily on a strong product line-up, which includes core brands, licensed brands and lucrative product associations. Owing to its popularity among young boys and girls, the company’s premier brands like Hot Wheels have been the category leader in multiple product segments for several years.
Mattel also forayed into other consumer product categories such as apparel, fashion and accessories to build brands. In fact, in 2018, worldwide gross sales for Hot Wheels were up 9% and reached highest annual sales in its 50-year history. Global POS were also up by a high-single digit for the year.
Mattel currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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