COMPANY DESCRIPTION

Mattel designs, manufactures, and markets toy products, which are grouped into Mattel Girls and Boys Brands, Fisher-Price Brands, and American Girl Brands categories. Co.'s operating segments are: North America, which markets and sells toys in the U.S. and Canada through the Mattel Girls and Boys Brands and Fisher-Price Brands categories; International, which focuses mainly on sales to retailers and wholesalers in European, Latin American, and Asian countries, and in Australia and New Zealand; and American Girl, which provides historical dolls, books, and accessories, as well as My American Girl® and Bitty Baby® brands, and publishes Advice and Activity books and the American Girl magazine. 

 

ECONOMIC MOAT

Mattel economic moat is evidenced by their ability to capture about 17% of sales in the domestic toy industry. Combined, the three biggest constituents of the toy market, Mattel, Hasbro, and Lego, control nearly 40% of the very fragmented U.S. toy space.  Mattel’s moat is due to size, scale and strong brand.  

 

OUTLOOK

Mattel continues to operate under challenging conditions, most notably, unfavorable currency translation effects. Mattel has a number of turnaround initiatives under way. Mattel is targeting over $250 million in cumulative savings by the end of 2016. It is also becoming more aggressive in exploiting its core brands through new and expanded strategic partnerships and licensing, and by developing more content for digital media, TV, and movies. The stock had a big sell-off from its 2013 peak. MAT has worthwhile capital appreciation and an attractive yield and favorable risk profile.

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STRENGTHS

  • Strong brand portfolio

  • Profitable licensing agreements and partnerships provide additional revenue sources

  • Worldwide distribution network 

WEAKNESSES

  • Frequent product recalls

  • High customer concentration 

THREATS

  • Cheaper imitations and counterfeit goods to impact brand image

  • Increasing wages in China could pressurize margins in future 

OPPORTUNITIES

  • Cost savings programs

  • Changing technology, fashion preferences and cultural trends

  • Growing young consumer base and therefore the market for toys and games in the emerging markets 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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