Fresh off a chaotic fourth quarter, Inon Kreiz, the nondescript Mattel (MAT) chairman and CEO, is confident that 2023 will be a big year for the iconic toy maker. We maintain an open-minded stance regarding activist investors who challenge stewardship.
“We always welcome shareholder feedback and are happy to have conversations with investors,” Kreitz, who has been Mattel's CEO for about six years, said on Yahoo Finance Live on Thursday. “We are focused on executing our strategy and our goal of creating long-term value is largely aligned with all of our shareholders.”
The comments came after toymaker Mattel reported a 16% increase in sales thanks to the blockbuster Barbie movie in its fourth quarter results. However, profits were lower than analysts expected.
Here's Mattel's performance in the all-important holiday quarter:
Revenue summary
-
Net sales: $1.62 billion, up 16% year-over-year, with estimates of $1.64 billion
-
Adjusted gross profit: 48.8% (43.1% last year) vs. estimated 49%
-
Adjusted EPS: +61% YoY to $0.29 vs. $0.31 expected.
What else caught our attention?
-
Statistics you need to know: Total global claims for the infant, toddler, and preschool sector in 2023 (Fisher-Price) was $1 billion, down 10% from the previous year.
-
Full-year sales forecast: Approximately $5.44 billion vs. estimated $5.54 billion
-
Full year adjusted EPS guidance: $1.35-1.45 vs. estimated $1.37
A very interested onlooker enters.
After the publicly celebrated release of “Barbie,” which grossed more than $1.4 billion worldwide in theaters last year, Mattel announced earlier this month that well-documented instigator Barrington Capital founder I was surprised by Mr. James Mitarotonda, who is also the Chairman of the Board.
Mitarotonda, who reportedly acquired an undisclosed stake in Mattel, laid out his list of demands in a scathing letter to Kreitz.
The demands include divesting the Fisher-Price and American Girl toy brands, which Mr. Barrington believes are underperforming relative to their potential.
Barrington estimated that Fisher-Price's sales fell 40% in the 12 months from 2015 to September 30, 2023. By Barrington's calculations, American Girl sales would have fallen 61% during this period.
“In our view, this long-term ceding of market share suggests that Mattel may not be the appropriate owner of these brands. We believe this is undermining the success of the company and undermining shareholder value,” Mitarotonda said. I wrote in the letter.
“Spin Master recently acquired Fisher-Price competitor Melissa & Doug for $950 million, or 2x revenue and 10.5x EBITDA. [earnings before interest, taxes, depreciation, and amortization]”This suggests that now is the time to consider selling Fisher-Price and American Girl,” Mitarotonda added. “In our view, there may be strong demand for these high-profile brands, and a sale would not only free up funds for other activities.”However, the company's growth profile has changed and its price-to-earnings ratio has declined. It will be even higher. ”
Other issues surrounding Mr. Barrington include “excessive” stock-based compensation given to Mr. Kreitz and other executives. Mr. Barrington said Mr. Kreitz should hand over his chairmanship to the company's lead director and institute a new $2 billion share buyback plan.
If Mattel takes these steps, Barrington estimates that Mattel's stock could “more than double” in three years.
Prior to the Mattel turmoil, Mr. Barrington in 2019 pushed for a board overhaul and eventual dissolution of L Brands, the former owner of Victoria's Secret (VSCO) and Bath & Body Works (BBWI). It has gained a reputation among investors. After dissolving the two companies in July 2021, they are now independent public companies.
Then, in 2013, Mr. Barrington advocated for the dissolution of restaurant giant Darden (DRI). By May 2014, Darden sold its Red Lobster chain to private equity firm Golden Gate Capital for $2.1 billion.
Mitarotonda did not respond to multiple requests from Yahoo Finance for comment on this story.
Crites extended a small olive branch to Barrington.
On Wednesday night, Mattel unveiled a new $1 billion share buyback plan and a new $200 million cost-cutting plan.
Mr. Kreitz contends that a smaller share buyback would be financially sound for Mattel in relation to Mr. Barrington's demands.
“Our announced $1 billion share repurchase program is an appropriate amount that is consistent with our capital allocation priorities and balance sheet, and provides confidence in our continued execution of our strategy. “We continue to position the company for long-term value creation,” Kreitz said.
However, Mattel was reluctant to sell Fisher-Price and American Girl.
In fact, the company announced that it will no longer report American Girl as a separate segment and will more closely integrate its North American operations. Kreitz told Yahoo Finance that Mattel is well on its way to continuing its investment in Fisher-Price and has just renewed the brand's management team.
These are clear signs that Mr. Kreitz is not willing to let go of two iconic brands to appease activists.
“As a management team, we are constantly evaluating our portfolio,” Kreitz said. “We want all our brands to grow and be in a strong position. There's work to be done with Fisher-Price, and we're doing it now.” Kreitz said Fisher-Price is “a valuable asset.” He added.
Brian Sozzi I'm the executive editor of Yahoo Finance. Follow Sozzi on Twitter/X @BrianSozzi And even more linkedin. Have a tip about a deal, merger, activist situation, or more? Email brian.sozzi@yahoofinance.com.
Click here for the latest technology news impacting the stock market.
Read the latest financial and business news from Yahoo Finance
