There are a few names that have stuck through U.S. culture for years, namely in the minds of toy-loving kids and the parents who spend money on them.
Among these names is Mattel, a company that has spent decades producing gadgets, dolls and action figures, plus a whole host of other fun devices that help kids crush boredom. It’s not unlikely that multiple generations within the same families have played with toys by this longstanding industry giant.
It’s easy to assume that a company with the type of legacy and reach as Mattel would never have to worry about financial troubles. However, nothing is certain in the U.S. economy, and one of the country’s top toymakers could be in some serious trouble.
In terms of trouble, we mean shares falling by over a third in a year. Chief Executive of MGA Entertainment Inc., Isaac Larian, slammed the company and called off talks of a merger between the failing company and the one he represents.
Between billions in debt and an average interest rate of over 6.5%, the company is in a financial struggle and facing a mammoth 42% in operating expenses. These conditions are made worse by their major legal liability, resulting from the infamous Fisher-Price Rock ‘n Play Sleeper that has led to several baby fatalities.
While Fisher-Price stood by the product’s safety at the time, analysts have crunched numbers and found a recall of the product could cost up to $60 million. Now the mess may be too huge to correct – between legal troubles, swelling debts, and tumbling stock prices, Mattel is in bad shape.
Larian said the company could not be salvaged, especially with the way management is now. He said it was in the best interest of his own company not to continue entertaining the merger idea. That could’ve been one of the last chances Mattel had to stay in the mix and possibly even set themselves up for a rebound in the future.
There isn’t a guarantee another buyer or merger opportunity will come along, leaving the trouble toy giant to contend with their own problems in the present. The 3% decline in the recent quarter saw them add more erosion to a share price that had dropped over 90 cents in the previous year.
Mattel released a statement, promising significant improvements soon to their operating income, crediting a strategic transformation plan designed to drive shareholder value in the long-term. That’s a strong statement, but can the company back it up? How long do they have before the market simply passes them by, and their troubles outweigh what they have going for them?
Some claim the struggles they face go back a few years, where they lost the license for the Disney Princess dolls to Hasboro. Seeing such a big product go to their direct rival shifted their fortune greatly. As tastes have shifted to digital toys, will Mattel find a suitable way to move forward with toys that kids of today like? They may have to in order to survive.
