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.
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.
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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Strong brand portfolio
Profitable licensing agreements and partnerships provide additional revenue sources
Worldwide distribution network
Frequent product recalls
High customer concentration
Cheaper imitations and counterfeit goods to impact brand image
Increasing wages in China could pressurize margins in future
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
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