Mattel's CEO Thinks Internet-Connected Toys Are the FutureBy
Four months into job, former Google executive lays out plans
Strategy focused on mobile, promoting education through play
Mattel Inc.’s Margo Georgiadis, recruited from Google earlier this year, is shaking up the 72-year-old company by cutting its dividend and investing the money in entertainment and internet-connected toys.
The chief executive officer, who started in February, told analysts that she wants shift Mattel away from being a vendor of Barbie dolls and Hot Wheels at physical stores and into a company centered on mobile technology and activities. The strategy will be funded in part by reducing the dividend 61 percent.
“It’s time to reinvent this company to ensure it reflects where consumers and the market is going,” Georgiadis said in an interview before a presentation to analysts in New York. Mattel will go from being considered a traditional toymaker to a “future-proofed kid-experience company.”
Mattel’s toy brands need to adapt to the way kids are now being raised, Georgiadis said, citing toddlers on iPads and education-obsessed parents. This will lead to a big push in digital content, internet-connected toys and products that promote learning, she said. She also wants to expand into gaming, live experiences and other categories of products.
In addition to saving by lowering the dividend, Mattel is revamping its supply chain and cutting bureaucracy. The company sees this allowing it to funnel as much as $350 million into its growth strategy over the next few years and fueling sales expansion in the high-single-digit percentage over the period. For 2017, Mattel sees revenue gaining at a low-single-digit percentage.
Georgiadis inherited a company in turmoil. Revenue has fallen amid the loss of major licensing deals -- Disney Princess and Frozen -- and Mattel is struggling to produce hit toys at the rate it once did.
There had been positive signs before she arrived as Barbie -- its biggest brand -- posted periods of robust growth last year. But that optimism was erased in the fourth quarter, when Barbie revenue fell 2 percent, dragging down the entire company’s performance and hammering the stock the most in eight years.
The results were exacerbated by a lackluster Christmas season at many of its retail partners, including Target Corp. and Toys “R” Us Inc. This created an excess of inventory in the first quarter, sparking a 15 percent sales drop that once again sank the stock. The company used promotions to clear the glut of products.
Mattel has maintained its dividend even as the outlay’s amount surpassed profit: It paid $518.5 million to shareholders last year while generating $318 million in net income. With shares that had lost 18 percent of their value in 2017 through Tuesday, Mattel’s dividend yield of 6.7 percent was the fifth-highest in the Standard & Poor’s 500 Index, according to Bloomberg data.
Speculation about a dividend cut had weighed on the stock, so the announcement could remove that overhang, Drew Crum, an analyst for Stifel Financial Corp., said in a research note before the presentation.
The shares sank as much as 5.1 percent to $21.50, touching their lowest intraday level in eight months, after the company announced Wednesday that the third-quarter dividend would be cut to 15 cents per share from 38 cents.
Mattel has been seeking new direction since January 2015 when it fired CEO Bryan Stockton, who had come from the packaged foods industry. Board member Christopher Sinclair replaced him on a temporary basis. Meanwhile, reviving the company’s brands and relationships with Disney was left to Richard Dickson, who now serves as chief operating officer.
Georgiadis’s tech experience includes building and managing business units, but not promoting and producing consumer products or dealing with retailers. During two different stints at Google, she ran the advertising business for the Americas and worked in global sales.
“I’m really focused on looking at where the industry is headed and how the world is evolving,” Georgiadis said. “Toys really need to adapt to this new era.”
— With assistance by Janet Freund