NEW YORK (Reuters) - Toy shoppers may put Bratz dolls on their “hard to find” list in the final days before Christmas as a court order banning sales of the edgy, chic toys early next year will make retailers wary of restocking.
At issue is the injunction that No. 1 U.S. toymaker Mattel Inc MAT.N won against family-owned MGA Entertainment in a bitter, years-long legal battle, which requires MGA to recall all Bratz dolls and destroy toy molds. Since their launch in 2001, the Bratz dolls have stolen market share from Mattel’s flagship Barbie.
The court order was issued by U.S. District Judge Stephen Larson, after finding that “hundreds” of Bratz dolls infringe on the copyrights owned by Mattel Inc.
MGA filed a notice of appeal and asked for the enforcement of the court order, which has been stayed until early next year, to be delayed indefinitely.
But retailers that sell Bratz, including Wal-Mart Stores Inc (WMT.N), Target Corp (TGT.N) and Toys “R” Us, which are required to ship the dolls back to MGA if the order is upheld, may be loath to be left with too much of the dolls meanwhile.
“There is a very good chance that certain retailers will not reorder inventory,” said David Leibowitz, a senior research analyst at Horizon Asset Management. “Very few retailers want to sell merchandise which is going to be under somebody else’s control in the very foreseeable future.”
Jim Silver, editor-in-chief of Timetoplaymag.com, said he has noticed that where Bratz earlier had a whole row of space in one store, it now had only 30 percent.
“Nothing speaks the truth as how much shelf space you have. ‘High School Musical’ and ‘Hannah Montana’ have more shelf space than Bratz has now,” he said, referring to popular toys based on Walt Disney Co (DIS.N) entertainment.
But die-hard fans of the dolls with large eyes and pouty lips could be keen to collect them ahead of their possible demise. Though Bratz’s popularity is already being challenged by the likes of Disney’s Hannah Montana, the injunction could be a blessing in disguise.
“Consumers were surprised of the news that Bratz would be discontinued after the Christmas holidays,” said Robyn Barnette, owner of the fan website Bratz Heaven, in an e-mail interview.
“(MGA) was caught off-guard with the injunction and did not have enough time to prepare its ‘farewell lines’ with what they were offering,” Barnette said. “(People) will purchase whatever is available before the dolls are removed from store shelves.”
Piper Jaffray analyst Anthony Gikas said that key toy retailers like Wal-Mart, Target and Toys “R” Us will be “watching this very closely,” adding that they might not want to be caught with a lot of products as they moved into 2009.
A Toys “R” Us spokeswoman said the retailer was assessing the situation, while a Wal-Mart spokeswoman said it was “business as usual” when it comes to selling Bratz dolls.
The holiday shopping season, when toy companies usually rake in the lion’s share of their revenue, has turned out to be dismal this year. According to the gloomiest forecasts, this could be the worst holiday season since the early 1990s.
Retailers have kept a close eye on inventory this year to reduce the need to slash prices and get rid of excess products closer to Christmas, which could also spell trouble for MGA.
But with an enforced scarcity, the remaining Bratz could become collectors’ items.
“The first generation Bratz dolls from 2001, also known as the first edition Bratz, and the dolls that were the result of Carter Bryant’s creation, were extremely valuable and only serve to become more valuable now,” Barnette said.
Barnette’s website, Bratz Heaven, was launched in April 2005, around the time the Bratz dolls seized the attention of pre-teenage girls around the world. The website draws up to 40,000 visitors per month, Barnette said.
Mattel launched in 2004 its legal battle over Bratz, which managed to steal the limelight from Mattel’s own star toy Barbie. If the order is upheld, Mattel may not keep the Bratz line going and allow it to further erode demand for Barbie. But the company has remained mum on its plans.
Earlier this year, a jury awarded Mattel all but four original Bratz drawings made by Carter Bryant, after it was found that Bryant had still been employed by Mattel when he designed the Bratz.
The future of the doll franchise hinged on court-ordered talks between the companies, but discussions failed to yield results. Judge Larson issued his injunction order soon after.
Analysts and legal experts have said that the companies would still be better off settling their differences. But there has been no sign so far that the two can reach their own resolution.
“There is still a long way to go on this case,” Gikas said. “There are some really, really deep-rooted issues between the two companies. MGA is not going to give up easily. This is far from over,” Gikas said.
Reporting by Aarthi Sivaraman, editing by Matthew Lewis