Mattel (MAT) Continues to Improve Board to Revive Business

Mattel, Inc. MAT is likely to continue with its long-standing struggle that stemmed from soft consumer demand and sales crunch. Not exempting the prevalent fate of U.S. toymakers, the company is suffering from consequences of the Toys ‘R’ Us liquidation.

In order to mitigate such a difficult operating environment, Mattel has been relying on enhancement of its board that would help it augment the business and future capabilities.

To this end, the company recently elected Dr. Judy Olian as one of its board of directors. In fact, out of the 10 directors in Mattel’s board, five have been appointed in the last five months. We believe that by doing so, the company is trying to bring potential changes in its functions, which might drive growth over the long term.

Notably, Mattel suspended the quarterly dividend of 15 cents per share, starting in the fourth quarter of 2017, to augment financial flexibility, fortify balance sheet and facilitate investments. The dividend suspension is not going down well with investors and is in turn hurting the company’s share-price performance.

A look at Mattel’s price trend revealed that the stock had an unimpressive run on the bourses in the past year. Shares of the company have gained 1.6% against the industry’s rally of 12.8% in the same time frame.

Efforts to Revive Business

All of Mattel’s recent strategies hint at the company’s unremitting aim of reviving its sales and form its business in a way that would ensure a new organization design, capable of bringing positive transformations and building capacities.

Beside enriching its board, the company is also focusing on product innovation to drive sales. It is undertaking efforts on the digital front, and focusing on better execution of marketing and promotional initiatives to bring back its flagship brands — Barbie and Fisher-Price — to their former positions.

Apart from new products; the company expects to benefit from increased advertising and stronger trade promotion and merchandising support in the months ahead. It believes that e-retail is a priority and therefore has considerably stepped up initiatives to drive momentum in this area. Further, the company is expanding distribution through some major players in China and driving online sales through channels like T-Mobile and JD.com.

Where Does Mattel Stand?

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 JAKK 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 the second quarter of 2018 have declined 15% year over year on a constant-currency basis. It also led to a sales slump across every brand under Mattel.

Zacks Rank & Better-Ranked Stock

Mattel currently carries a Zacks Rank #4 (Sell). A better-ranked stock in the industry is Glu Mobile GLUU, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

Glu Mobile has a long-term EPS growth rate of 15%.

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