Mattel (MAT) -) shares edged lower Friday, although the stock has more than quadrupled the pace of the S&P 500 over the past month, as investors look to the impact of this weekend's 'Barbie' movie debut in U.S. theatres.
Barbie, which was first debuted by Mattel in 1959 by toy designer Ruth Handler, has been the world's best-selling, and most-recognized, doll brands in the world for several decades.
Criticism of her role in shaping unrealistic body imaging among children, as well as her mono-ethnic appearance, saw Barbie lose much of her relevance in the mid-2000s, as rival Hasbro (HAS) -) leveraged the popularity of Disney's (DIS) -) 'Frozen' movie, and its feminist star Elsa, to unseat Barbie as the world's best-selling doll.
A major reimagination of the brand in 2019, which included multiple ethnicities and varying body types, revied the dolls' fortunes and its place as a key Mattel revenue driver. Barbie sales, in fact, comprised around a quarter of the toymaker's overall billings last year.
"Barbie was at a prime point for reinvention. Over the years we’ve heard about Barbie’s impact on self-image and seen Barbie transform along race and culture lines," said Katie Thomas of the Kearney Consumer Institute, an internal think tank at global strategy and management consulting firm Kearney. "The brand also has a lot to work with, category-wise—from apparel and beauty to Barbie Dreamhouse home décor, to Barbie pink food partnerships, etc. and has chosen partners accordingly."
Sales have been on a downward trend, however, with first quarter Barbie revenues down 41%, to $179 million, in the traditional post-holiday slump, after falling 33% to $372 million, over the three months ending in December.
The group's recent focus on developing toy brands across multiple media platforms, including video games, children's television and movie franchises, unveiled by CEO Ynon Kreiz earlier this year, could provide a crucial sales catalyst for the iconic Barbie as the Warner Bros Discovery (WBD) -) film, which stars Margie Robbie in the eponymous role alongside Ryan Gosling as her sidekick Ken, debuts in U.S. theaters on Friday.
"We worry somewhat about Mattel's long-term management of Barbie’s positioning, and remember the period about 10 years ago when Moms were anti-Barbie," said D.A. Davidson analyst Linda Bolton Weiser. "But Mattel has turned around the brand with a brilliant messaging pivot and advertising campaign highlighting that Barbie helps girls reach their full potential."
"Mattel said they fully tested this 'Barbie' movie concept with Moms, and that they anticipate no negative backlash," she added.
Bolton Weiser notes that a successful Barbie movie could support near-term toy sales, enhances the brand's standing in popular culture, increasing high-margin brand licensing revenues and ultimately provide a boost to Mattel's bottom line from a cut of the film's profits.
Industry reports suggest Barbie, which will debut alongside the cold-war thriller 'Oppenheimer', could generate as much as $110 million box office receipts over the coming three days. The National Association of Theatre Owners says "millions of worldwide moviegoers who are planning to see both films on different days" over the weekend.
Say it LOUDER, Barbies and Kens! 🤩👏 Get your tickets to see #BarbieTheMovie only in theaters TOMORROW: https://t.co/wWSAASFfu3 pic.twitter.com/gjSH3ZzMoW
— Warner Bros. Pictures (@wbpictures) July 20, 2023
"Mattel's 2023 guidance already builds in a 'hockey stick' sales recovery in (the second half of the year) and we don't have visibility on what could cause it to greatly exceed the guidance, therefore we are not 'superpounding' the table here on the stock," said Bolton Weiser. "But our long-term thesis is unchanged, in that Mattel has much opportunity to unleash the value of its intellectual property."
Mattel shares were marked 0.14% lower in early Friday trading to change hands at $21.23 each, a move that would still leave the stock up more than 20% over the past month, compared to a 4% gain for the S&P 500 benchmark.
Mattel will publish its second quarter earnings on July 26, with investors eyeing any commentary on the Barbie movie impact as well as its full-year forecasts for flat 2023 sales and adjusted earnings in the region of $1.10 to $1.20 per share.
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