Mattel Gets a Kick in the Pants

06/05/2015 7:00 am EST


George Putnam

Editor, The Turnaround Letter

Tracing its roots back to the late 1930s, our latest featured turnaround idea is one of the world’s leading producers of toys, including brands such as Barbie, Hot Wheels, and Fisher Price, suggests George Putnam, editor of The Turnaround Letter.

Mattel (MAT) has seen its results slip in recent years as the company failed to keep up with consumer shifts to electronic playthings and other innovations.

Mattel brought in a new CEO, Christopher Sinclair, in January of this year, and he further shook up the executive suite by naming Richard Dickson as Chief Operating Officer. Together, they are working to re-ignite the spirit of innovation at Mattel.

They have restructured product design and marketing teams to make the company more creative and responsive to market opportunities.

In addition, they are forging partnerships with innovative companies outside the toy industry, such as a collaboration with Google (GOOG) to bring the classic Viewmaster toy into the 21st century. 

At the same time, the company is working to take costs out of the business and expand its presence in international markets. 

In many ways, Mattel today looks like its competitor Hasbro (HAS) did a couple of years ago. 

It has great brands, global scale, and a strong balance sheet.  Over the past two years, Hasbro’s stock has risen by 50% while Mattel’s has fallen by 37%. 

With the kick in the pants that Mattel is getting from its new management team, it should be able to get its stock on an upward trajectory again. 

And even while you wait for the rebound to take hold, you get nicely compensated by the more than 5% yield. Mattel’s stock has begun to move up in recent weeks, but we think it has a lot further to go. 

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