Classic toy company Mattel (MAT, Financial) (-35%, -2.20%), was also a detractor. In the fourth quarter of 2019 Mattel revenues fell 3%, but, more importantly, margins increased and CEO Ynon Kreiz announced new strategic plans to continue growing profits and monetizing intellectual property. The Dolls business (primarily Barbie) grew 3% in the face of tough Frozen 2 competition, Vehicles (Hot Wheels) grew 8%, and other brands continued stabilizing, while American Girl was more challenged in the period as it continued to shrink double digits. Mattel reported positive earnings in 2019 for the first time since 2016, and we expect much higher cash earnings in the years ahead despite the sharp COVID-19 retail disruption, as Mattel sells through a variety of channels, including online. Leading toy brands have historically been resilient during tougher economic times (Mattel 2009 cash flow was roughly similar to 2007 levels, and overall toy industry sales were only down 1% from ’08 to ’09). Mattel’s intellectual property is seeing a significant uptick in demand from children and streaming platforms today.
From Mason Hawkins (Trades, Portfolio)' Longleaf Partners first-quarter 2020 commentary.
