Mattel is looking to revitalize American Girl and Fisher-Price by using Barbie as a blueprint.

• Barington Capital is putting pressure on Mattel regarding its strategy for the Fisher-Price and American Girl brands.
• Ynon Kreiz, CEO of the toymaker, stated that Barbie serves as a blueprint for revitalizing "timeless brands in a timely manner."
• "Our brands resonate outside of stores, as we have proven. However, the challenge lies in scaling this success."

On Thursday, CEO Ynon Kreiz wants shareholders to understand the strength of Barbie.

The toy company is showcasing Barbie as a model for its strategy with Fisher-Price and American Girl brands in an investor presentation on Thursday, amidst pressure from Barington Capital activists.

Kreiz stated in a CNBC interview prior to the presentation that our objective is to modernize these enduring brands.

Mattel has experienced a 44% increase in share price since Kreiz took over as CEO in 2018. He has revived major brands such as Barbie and implemented a "playbook" strategy to make these franchises accessible to consumers across multiple segments.

The plan to release "Barbie," directed by Greta Gerwig and nominated for eight Oscars, has been executed.

"Kreiz stated that the objective was to establish multiple touchpoints to strengthen toy brands. After building a loyal fan base and cultural recognition, the next step is to expand the brand to other experiences, products, and opportunities to connect with the audience."

He stated that the "Barbie" movie was a reflection of our perception of the opportunities available to us.

"Barbie," directed by Greta Gerwig, grossed nearly $1.5 billion worldwide by capitalizing on pop culture appeal, eliciting both admiration and disdain for the iconic toy brand among consumers for over six decades. The film's success resulted in approximately $150 million in related merchandise and product sales, including "I am Kenough" sweatshirts and a portion of Mattel's box office earnings.

Kreiz stated that we are now considering our customers not only as consumers but also as fans.

In July, the movie will embark on a 37-city tour with the Sinfonietta, an all-female orchestra. Meanwhile, "Barbie" is up for acting awards, best original song, best costume design, and best picture at this Sunday's Academy Awards.

Josh Silverman, chief franchise officer at Mattel, stated that the company is creating an ecosystem of true franchise flywheel for products, entertainment, television, music, publishing, and digital gaming.

Following in Barbie's footsteps

Mattel's "Barbie" film provides a blueprint for developing intellectual property beyond the toy industry, according to Kreiz.

"Our brands resonate outside of stores, as we have proven. However, the challenge lies in scaling this success."

The Fisher-Price and American Girl brands of the company have undergone significant changes for several years.

The decline in sales for both brands can be attributed to changes in consumer purchasing habits and the closure of Toys R Us. In the past year, American Girl experienced a 9% drop in net global sales, while Fisher-Price's sales for infants, toddlers, and preschoolers decreased by 10%.

Barington Capital wrote a letter to Kreiz before Mattel's February earnings report, stating that the company's brands are negatively impacting the success of its other segments and decreasing shareholder value.

Despite the activist investor's letter in February, Mattel had already started revitalizing American Girl and Fisher-Price beforehand, as seen by Kreiz.

Even before the pandemic, American Girl was facing sales challenges due to the presence of copycat dolls and the decline of experiential shopping associated with its flagship stores.

Although American Girl dolls can be bought online, Mattel's primary marketing strategy historically involved promoting its retail stores with cafes, hair salons, and catalogs.

Despite the pandemic, the American Girl brand emerged leaner with fewer retail locations and a greater emphasis on direct-to-consumer online shopping. Sales in 2021 rose 5%, but they fell again in both 2022 and 2023.

Kreiz acknowledges that the difficulties with the American Girl brand were not related to the products, but rather to its marketing strategy.

The brand will experience growth in its flagship stores, increased product innovation, and expanded licensed entertainment, including a partnership with Disney princesses and a film project with .

"Silverman stated that there are opportunities to expand the American Girl brand and develop the story it tells in a thoughtful and authentic manner. He emphasized that the franchise serves as a bridge between toys and entertainment."

American Girl movie executives kept mum about their plans, with no release date yet.

"Lisa McKnight, Mattel's chief brand officer, stated, "We're currently collaborating with a writer to uncover that story. We believe it will be a fantastic brand opportunity when the film is released.""

Where Fisher-Price fits in

Mattel is revamping several of its preschool entertainment properties, including a Hot Wheels flick with J.J. Abram's Bad Robot, a Major Matt Mason movie starring Tom Hanks, and a Lily Collins-led Polly Pocket film, all written and directed by Lena Dunham.

The company is set to launch an animated series featuring Barney, followed by a product line in 2025. Marc Forster has been appointed to direct and produce a film adaptation of the Thomas & Friends franchise.

Silverman stated that we will assess, select, nurture and reintroduce properties in the preschool market with complete franchise potential.

Mattel's billion-dollar infant, toddler and preschool division includes these brands, and the company has been focusing on innovative growth strategies in recent years.

"McKnight stated that the business is both large and intricate. He explained that over the past few months, they have delved deeper into the business and identified two fundamental aspects. The first is the core of the business, which targets infants and toddlers, with parents being the primary purchasers. The second is the preschool entertainment business, which is driven by children's demand and fueled by content."

In 2023, Fisher-Price's net sales were approximately $850 million, which represented a 9% decline from the previous year. Fisher-Price accounted for roughly 70% to 80% of the total division's annual revenue.

The two segments that Mattel is actively exiting, Power Wheels and baby gear, are weighing heavily on Fisher-Price. Kreiz stated that Mattel lacks a "unique advantage" in these items and faces intense competition for market share. Additionally, he noted that the majority of the losses in the infant, toddler, and preschool division were a result of these exits.

Mattel is striving to create innovative products for its 90-year-old brand, including customizing the appearance of children's developmental toys to appeal to modern parents.

McKnight stated that millennial parents prefer baby toys that complement their home decor style, and they are currently considering the fabric choices and color palettes for those items.

Fisher-Price is expanding its wood toy line with a new introduction from Mattel, which will be available exclusively in North America this spring and globally in the second half of 2024.

McKnight stated that the product is visually appealing and makes customers feel good about displaying it, and it's made from sustainable materials, which is crucial to this customer.