Two retro brands build good news for toymaker

Hidden within Mattel’s announcement of plunging sales and massive layoffs were two bright spots that may be the key to the toymaker’s turnaround — and they’ve been around for a combined 100plus years.

Barbie, the 59yearold doll that is Mattel’s biggest brand, had a 12 percent jump in sales in the second quarter, its third straight gain. Hot Wheels, which just celebrated its 50th birthday, had a 21 percent surge in revenue.

What’s behind the revival in oldschool brands? A strategy that’s summed up in company Power Point presentations as “giving them a new view of what they’ve been watching all along.” The “them” refers to today’s young parents, who may have grown up with Barbies and Hot Wheels only to snub them in favor of educational apps and fancy gadgets for their own kids. Mattel is trying to lure those customers back by recasting the toys’ image to play up not only the nostalgia but a newer notion: They’re beneficial to child development.

The sales gains indicate this new view may be taking hold.

“When you apply the right strategy behind these brands, you cannot just turn them around, you can put them on a path of accelerated growth,” said Ynon Kreiz, who in April became Mattel’s fourth chief executive officer since 2014. “We’re going to take this same approach with the rest of the company.”

A broader turnaround is still a challenge. Mattel’s total revenue declined 14 percent to $841 million in the second quarter, missing Wall Street projections, as other major brands, such as Fisherprice and American Girl, sank. The El Segundo, Calif.based company — hit hard by the liquidation of retailer Toys R Us Inc. — also said it was eliminating more than 2,200 jobs, or about 22 percent of its corporate workforce, as part of a costcutting plan started last year.

But the growth of Hot Wheels, the secondlargest brand, and especially Barbie, which has seen sales decline in three of the past four years, is encouraging, according to Gerrick Johnson, an analyst at BMO Capital Markets.

“Everything they reported on Barbie and Hot Wheels was positive,” said Johnson, who recommends buying Mattel’s stock. “They have two brands really working.”

And the foundation of those gains is this new view, according to chief operating officer Richard Dickson, who has spearheaded this strategy since returning to the company in 2014. Parents, who were already overloaded with choices for their kids, increasingly were considering these frivolous and disposable — Hot Wheels start selling at just 99 cents per vehicle — and that placed a cap on their growth potential.

For Barbie, the issues were bigger: a growing perception of the brand as an outdated collection of stereotypes, such as that all girls care about are clothes and boys, while setting an unrealistic standard of physical beauty. In an age of female empowerment, that smelled like death.

Dickson talks incessantly about the “purpose” of the company’s brands, and how it should drive everything from products to marketing. For Barbie, that boils down to being good for girls. And this is not just that the doll is fun, but that the play it inspires is a good — even great — child development tool.

“We’re reframing our play as beneficial,” Dickson said in an interview.

It may seem farfetched that an 11½inch doll could engender creativity and ambition, while a miniature car is a hotbed for critical thinking — and that parents would believe such a concept. But there is a growing movement of academics and educators pushing mounds of research that shows such openended play is paramount to developing these essential skills. Something as seemingly mundane as playing house is really roleplaying that builds empathy, teamwork and communication.

“Play was absolutely crucial to human evolution,” said Peter Gray, a professor of psychology at Boston College who studies childhood with a Darwinian bent. And the decline of play time from all the structured activities that have been hoisted on kids is “clearly having harmful effects,” such as less resiliency and not being able to solve their own problems, he said.

Dickson has latched on to Mattel’s own research about the changing behaviors of millennial parents. A rising number care more about what their kids consume — whether it’s food, entertainment or toys. And with the aftershocks of the Great Recession and globalization making life more competitive, they are spending on child development.

U.S. middleclass parents of a child born in 2015 are projected to dish out $38,000 on education and development from birth through age 17, according to the U.S. Department of Agriculture. That’s a $10,000 inflationadjusted increase, or a 35 percent gain, from a decade earlier. For highincome families, spending is estimated to surge 85 percent to $87,000.

Dickson internalized this and saw Mattel’s way forward as layering the developmental benefits of play over its brands. In a bid to stand out, it would have to keep making toys loved by kids, but now, more than ever, also be parentapproved.

Dickson, who spent al most five years running licensing and then Barbie, left Mattel in 2010 to become an apparel company CEO. In July 2014, the toymaker’s board brought him back, with marching orders to fix Barbie and then the rest of Mattel.

Within months, the company moved into fullblown turnaround mode.

Walt Disney, a longtime partner, decided to move the lucrative license for its Disney Princess and Frozen brands to archrival Hasbro Inc. Then CEO Bryan Stockton was fired and replaced by board member Chris Sinclair.

A shift began in October 2015 with the “Imagine the Possibilities” ad campaign. In it, girls teach neuroscience and coach a men’s soccer team. The spot ends with the viewer realizing these are just scenarios a girl is playing out in her bedroom with a Barbie doll. The ad, which is still running and has 120 million online views, helped lift the brand’s affinity scores, according to Mattel.

“That was the turning point for Barbie and the perceptions about what it means,” Johnson said. “It’s a 180degree turn. It used to be, ‘Ick, I don’t want my daughter to idolize Barbie,’ and gone to, ‘My daughter can use Barbie to live out her aspirations.’ ”