Summit News

Mattel plays "wait and watch" game

NEW YORK (Reuters) - This holiday season, the world's No. 1 toy maker, Mattel Inc MAT.N, will play a game of its own -- wait and watch.

Women look at a picture on a camera during the opening ceremony of Barbie Shanghai flagship store in Shanghai March 6, 2009. REUTERS/Aly Song

The owner of such brands as Barbie, Hot Wheels and Fisher Price would rather make and deliver toys depending on how consumer demand shapes up in the 2009 holiday season than end up with excess stock, Chief Executive Robert Eckert said at the Reuters Global Retail Summit on Thursday.

Its caution comes after toy makers and retailers had a tough holiday season last year, when grim economic times squelched parents’ ability to spend even on toys for their children.

Several retailers sold toys at significantly lower prices to empty out their inventories, and are now trying to match merchandise levels with consumer demand. Toy manufacturers are taking the same path.

“We’ll all be a little conservative this year,” Eckert said, participating in the summit by telephone. “We’d rather chase demand than build too much product, but that’s the environment we’re in. We accept it and retailers accept it and we are working together on it.”

But that strategy could mean a higher risk that Mattel could end up with no stock for a hot-selling product.

For example, its $80 Mindflex game that challenges players to control a small ball using the brain’s electrical activity, is tougher to make on short notice, Eckert said, meaning it could be in short supply if shoppers like it.

Also, Mattel is touting a more grown-up version of the Dora the Explorer doll, and $30 “Elmo Tickle Hands” gloves this year to attract shoppers.

The holiday sales season is critical for toy companies, which get a big portion of their sales during that time.

But the 2008 holiday period was the “toughest” he’d experienced since he entered the toy business, Eckert said. Mattel posted a 11 percent sales drop in the fourth quarter of 2008, which included the holiday season.

To complicate matters, Mattel has been in a court battle with privately held MGA Entertainment over the Bratz dolls.

Eckert said Mattel intends to rebuild the Bratz brand if it gains control of the line, but said he could not give specific details.

“We do see the opportunity,” Eckert said.

In an e-mailed statement referring to Bratz, MGA’s CEO Isaac Larian said the Bratz brand was “iconic” and that it had huge opportunities if it was nurtured by the right company.

A federal jury in California ruled last summer that Barbie doll designer Carter Bryant was still under contract to Mattel when he sold MGA some of the drawings on which Bratz was based. The matter is still not resolved completely, though an appeals court has denied MGA’s motion asking to stop the transfer of the Bratz franchise to Mattel.

Eckert also told the summit that Mattel, which is cutting costs by making its manufacturing and distribution processes more efficient, is not ruling out additional job cuts in the future. Nothing is planned imminently, he added.

Mattel eliminated about 1,000 jobs last November.

“As we garner more efficiencies, we do see opportunities to continue tightening the work force,” Eckert said.

While there is intense pressure on prices currently, it is not as great as a year or two ago, when Mattel faced higher commodity costs, he said.

Meanwhile, specialty toy retailer Toys “R” Us is gearing up to attract more frequent shoppers by putting products like laundry detergents, snacks and toilet paper in the front of its stores.

While its CEO Jerry Storch said it was too early to predict the 2009 holiday season's top toys, he pointed to current strength in Mattel's Barbie, which is celebrating its 50th year, and Hasbro Inc's HAS.N Transformers toys.

Mattel shares closed up 19 cents at $16.52 on the New York Stock Exchange.

Reporting by Aarthi Sivaraman; Editing by Phil Berlowitz