Toy company Mattel on Thursday unveiled a strategic growth plan during the company's Investor Day event in New York City. CEO Margo Georgiadis and his team outlined a strategy to boost growth and improve its financial performance that focuses on building and expanding its "power brands" (American Girl, Barbie, Fisher-Price, Hot Wheels and Thomas & Friends), accelerating growth in emerging markets and ramping up its innovation pipeline.
Plans to boost its core brands include adding more products, gaming, content and live experiences to its offerings. Additionally, Mattel plans to reshape its operations to become “leaner, faster, smarter," according to a company press release.
Management said that reshaping operations and reallocating resources will unlock reinvestment funds for growth and improve speed-to-market. Meanwhile, Mattel's base of revenue from core brands will continue to produce ongoing cash flow, they added. Executives said they expect to free up $150 million to $200 million to reinvest in the plans.
To focus and strengthen its product innovation pipeline, Mattel says it’s eliminating silos across brands, categories and partners, and switching to a companywide approach to development. This includes aligning metrics and investment levels with what they see as opportunities and encouraging more risk-taking across initiatives.
Through these changes Mattel hopes to speed up its innovation cycle time — targeting six- to nine-month cycles to develop new products, versus 18 months today. While not approaching the pressures that fast-fashion has wrought on apparel supply chains, that reflects a significant acceleration in those operations.
The pivot will include investments in analytics for supply chain, marketing and product innovation. Mattel says it’s already added talent in areas including brand management, commercial, manufacturing, connected product development, e-commerce, content and digital markets, according to a press release.
In addition to leaner operations, the company said it will lower its dividend to free up resources for reinvestment and to “strengthen its balance sheet and provide added financial and strategic flexibility.” In the medium-term, Mattel believes its this business model can achieve mid-to-high single digit revenue growth and operating profits at or above 15%.
The company's core brands are mainstays of toy retail, which has remained an in-demand category but in retail has faced extreme price competition. The troubles visited on private equity-owned Toys R Us over the holidays continued in the first quarter, with particular weakness in its baby and toys business. Meanwhile, Macy's added toys to its holiday offerings in its in-store off-price Backstage pop-ups, Amazon added toys to its voice assistant Alexa's repertoire ahead of the busy season last year and Kohl's turned to the popular American Girl line to get holiday shoppers into stores.
Like many companies, Mattel sees overseas markets, particularly in Asia, as opportunities for growth. The company predicts that its China business can be three to four times bigger by 2020 “if well-executed." Mattel also has plans to expand more rapidly in other emerging markets, including India and Indonesia.