Mattel: Looking For A Few Good Boy Toys

Over the past 33 years, the 5-ounce, 11 1/2-inch fashion plate known as Barbie has been the perfect daughter for parent Mattel Inc. Decked out in the latest styles, the button-nosed best-seller has carried Mattel through thick and thin--mainly with a mute smile on her face. But this month, she'll speak again for the first time since 1969, when a pull-string Talking Barbie went off the market. A sampling of her conversation: "Hi, wanna get a pizza?" and "You look really cool!"

Mattel has big hopes for Barbie's small talk. The El Segundo (Calif.) toy company gets roughly half of its $1.6 billion in annual sales from Barbie, boyfriend Ken, and their plastic playmates. If Barbie fans like her new Valley Girl-on-a-chip accent, sales for the world's oldest teenager should approach $1 billion by 1994, says John Taylor, an analyst with L.H. Alton & Co.

But even as they celebrate, Mattel executives are jumpy. When the toy industry gathers in New York on Feb. 10 for its annual American International Toy Fair, Barbie's first words will be accompanied by an even more ambitious push into a market where Mattel traditionally has been weak: toys for boys. David M. Mauer, brought in just over a year ago as co-president of Mattel USA, made his mark at Kenner Parker Toys by developing a winning series of action toys based on the Ghostbusters and Star Wars movies. Since joining Mattel, Mauer has cooked up a host of new products, including Bruno the Bad Dog, a toy truck that transforms into a ferocious barking canine. "My mission," Mauer declares, "is testosterone."

POWER FAILURE. Mattel knows it can't count forever on Barbie's magic charm to keep sales growing at a 17% annual pace. Last year, it tried to add to its toy chest with a bid for Tonka Corp. but lost out to archrival Hasbro Inc., the nation's largest toymaker. Now, Mattel wants to broaden its product line from within. It also plans to market other new lines acquired in a flurry of small acquisitions, and it has set up licensing agreements with Walt Disney Co. and the Nickelodeon cable-TV channel.

Still, two previous attempts by Mattel to broaden beyond Barbie ended badly. In 1983, a falloff in video game sales forced it to take a $421 million charge, and the company flirted with bankruptcy. Four years later, it lost $113 million when kids suddenly grew tired of its Masters of the Universe and Captain Power toys.

The man who saved the day was John W. Amerman, an 11-year Mattel veteran who became chairman in 1987. Thanks to a careful nurturing of the Barbie line and expansion overseas, Mattel's earnings have grown at a 41% average annual clip since 1988. Overseas sales now comprise 50% of Mattel's total--up from 20% in 1980. And analysts figure that Mattel's 1991 earnings were up about 30%, to $117 million (chart), despite the worst Christmas for retailers in years.

INTO LEATHER. Sales of Barbie alone have almost doubled in four years. Although the doll has been a winner since her debut in 1959, Amerman deduced a few years ago that Barbie was undermarketed. He and Jill E. Barad, co-president and head of the girls' toys division, started pushing for growth in Europe and Latin America by boosting Mattel's ad spending and expanding its sales force. They also broadened Barbie's appeal by dressing her in everything from business suits to leather miniskirts. "Barbie has turned into the No.1 franchise in the toy business today," says David S. Leibowitz, an analyst with American Securities Corp.

Even so, Amerman felt it was time to make a stronger bid for boys. Besides Bruno, Mattel will offer boys action figures based on the film Hook and TV's American Gladiators, as well as brightly colored baseball bats, gloves, and balls. Then there is Gak, a gooey substance that stretches, oozes, and splatters on the wall.

The boys' products are hardly the only new toys Mattel has up its sleeve. The toymaker's large-doll business, which has grown from $40 million in sales to $220 million since 1987, will introduce Li'l Miss Magic Jewels at the Toy Fair. Her magic wand produces make-believe gems. And Nickelodeon has contracted with Mattel to develop a new line of paint sets and other products unrelated to any Nickelodeon show.

ROLLER BABE. In what may be its farthest-reaching deal ever, Mattel has agreed to pay Disney for the right to place Mattel's name on three rides at Disney theme parks. Stores stuffed with Mattel products will be set up near each attraction. Mattel, which already makes Disney educational toys, also won the exclusive rights to sell dolls and stuffed characters such as Cinderella and other Disney movie favorites. The company hopes to grab the exclusive rights to sell stuffed Mickeys and other top Disney characters as those licenses, now held by Hasbro, start expiring in 1993. "By the year 2000, we should see volume for Disney comparable to what we have today for Barbie," predicts Amerman.

Still, Amerman wants more variety. Last June, he lured board-game guru Larry Bernstein, the former marketing head at Parker Bros., to whip up seven new games for the Toy Fair. Among them: Dark World, a game set in a haunted castle where action figures move through trap doors and revolving bookcases. A deal in January for International Games Inc. brings in an additional $30 million in revenues from such card and board games as Uno and Skip-Bo. But the board-game business is notoriously chancy: Mattel's last big attempt failed in 1979, with such forgettable games as Rocket Hockey and Up for Grabs. "People come and go in the board-game industry," sniffs John T. O'Neill, chief financial officer of Hasbro.

This time around, a product failure would be less likely to ravage Mattel than in previous expansions. Its net profit margins have more than doubled to over 7% since 1988, slightly better than the industry average of 6%. Amerman has also slashed long-term debt by more than half, to $175 million, while building a cash hoard of $150 million.

Mattel's best hedge against trouble, of course, is to keep Barbie fans happy. Coupled with the talking doll is a new version that zips around on rollerblades. Toys `R' Us Inc., the nation's largest toy retailer, is certainly doing what it can to move Mattel products: It's doubling the amount of shelf space per store for Barbie and friends, says Vice-Chairman Michael Goldstein. If boys flock to Mattel's new offerings as well, then Barbie will really have something to talk about.

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