Keeping with what has become a tradition at the California-based toymaker Mattel Inc. (MAT, Financial), former chief operating officer and interim CEO Christopher Sinclair has been named the permanent chief executive officer, announced last Thursday. The troubled toymaker had elevated former PepsiCo Inc. (PEP, Financial) front runner to the top spot after Bryan Stockton unexpectedly quit, seemingly from the two-year downward spiral of the world’s largest toy company.
The management change
Chief branding officer Richard Dickson will take over as COO at Mattel, which has been on the receiving end of a decline in sales due to intensifying competition and some costly marketing and branding mistakes. The 62-year-old Sinclair, it is hoped, will bring about a turnaround in the company’s fate since losing market value position to competitor Hasbro Inc. (HAS, Financial) for the first time since 1993.
“The Board and management team are focused on achieving a rapid turnaround at Mattel and we have a clear game plan for what needs to be addressed. This Company has a powerful portfolio of global lifestyle brands with untapped IP potential, extraordinary toy design and development expertise and unmatched global sales and supply chain capabilities,” Sinclair admitted in a statement released by the company, “By moving quickly to reduce bureaucracy that has slowed decision making and diffused accountability, we are already beginning to benefit from greater energy and focus throughout the company. While we still have challenges and lots of work to do, I am confident that, with a newly revitalized management team, including talent that we are sourcing from outside Mattel, we can quickly capitalize on growth opportunities and perform better for our customers, delight consumers and reward our shareholders. I look forward to providing more detail about our initiatives and plans on our April 16 earnings call.”
Shares sink, dividends may follow
Headquartered in El Segundo, Mattel has 31,000 employees in 40 countries worldwide and operates in 150 countries. The toy giant seem to be neck deep in trouble waters as it laid off 107 workers, across various departments, from the 2,000 staff at the headquarters. News of the CEO switch didn’t do much to buoy investor confidence with shares falling 43 cents to close at $22.65 on Thursday. Over 2014, Mattel’s shares have lost value by 44%, from $40.79 to $22.44. Already earning itself a position on S&P 500’s worst performing stocks in 2015 list, Mattel was hit hard by the popularity of Walt Disney Co.’s (DIS, Financial) animated princess movie "Frozen" merchandise deal going to competitor Hasbro. With a sequel in the offing, Mattel’s Barbie is not projected to hold up against Hasbro’s Disney princess brands.
Mattel was fumbling through the last holiday after Stockton mistakenly decided to delay marketing until Christmas was almost upon them. Sales fell a drastic 5.6% in the last quarter of 2014, for the fifth consecutive quarter, and ex-CEO Stockton resigned soon after the results were announced. Cash on the balance sheet at the end of 2014 stood at $971 million much below the $1.04 billion from 2013. Debt had climbed to $2.1 billion in 2014 from $1.60 billion in 2013 while sales dropped from $6.48 billion in 2013 to 2014’s sales of $6.02 billion.
Analysts take
Analysts are speculating the toymaker’s ability to pay out future dividend at the same scale that has been maintained so far. Mattel’s $1.52 per share rate is greater than the entire per share profit earned last year. If Thomson Reuters’ consensus earnings per share (EPS) expectations of $1.55 in 2015 and $1.60 in 2016 are to be counted upon, then Mattel may have to give up all earnings from operations as dividends. Reuters projects earnings for Mattel in the year 2015 to total at $5.96 billion and then drop to $5.83 billion in 2016. It remains to be seen if Sinclair’s optimism is well-founded.
