Mattel turns around as Barbie boosts its fortunes; ageless doll sells big, but toymaker has new ideas.

Mattel turns around as Barbie boosts its fortunes

Ageless doll sells big, but toymaker has new ideas 

An emphasis on old product lines has turned Mattel Inc. into a new Wall Street favorite. Shares of Mattel have gone from a low of $6.25 in 1988 to about $26 a share this month. The reason? Mattel's 31-year-old Barbie Doll is aging gracefully, analysts said.

"Barbie has grown about $160 million in two years," said John W. Amerman, chairman and chief executive officer of Mattel. "She's going great guns around the world. Once again, she's a megahit."

Barbie sales have fueled a turnaround at Mattel. The Barbie line produced an estimated $600 million of Mattel's $1.2 billion in sales last year -- a 40 percent increase from the year before.

Bolstered by the blonde bombshell, Hawthorne-based Mattel earned $79.6 million in 1989, up from $35.9 million in 1988 and a net loss of $113 million in 1987.

A new emphasis on Barbie collectible dolls, which can be priced as high as $250, helped create the renaissance in Mattel's sales, said Amerman. The decision was made to upgrade the Barbie line because the collector's market was already evident -- a 1959 Barbie original sells for about $3,500. The Palo Alto Barbie Hall of Fame museum is a popular Northern California attraction. The popularity helped convince Mattel management to give the green light to top-of-the-line Barbies.

"We took the approach that Barbie did not need to be constrained by price points in the Barbie line," said Amerman. "It worked."

Holiday Barbie, a $30 doll that comes with special gowns, was one of the hottest sellers for Mattel during Christmas 1988 and 1989. There is more to come, said Amerman. A $120 Barbie, dressed in a gold-sequined gown by Cher and Carol Burnett costume designer Bob Mackie, will be released this fall, along with a series of Barbie trading cards and Barbie backpacks and bags.

"Barbie is an annuity and she's brilliantly managed," said Emanuel Gerard, a partner at the New York-based institutional brokerage house of Gerard Klauer Mattison & Co.

Gerard said that Mattel's foundation of franchises, Barbie, the 22-year-old Hot Wheels cars and the 26-year-old See 'N Say product line, produces a solid network of sales year-in and year-out. As a result, Mattel is less susceptible to swings in the historically volatile toy industry.

"The new management has strengthened Mattel's position and you'll not see the peaks and valleys in earnings that are commonly associated with toy companies," Gerard said. "Close to 75 percent of Mattel's business is predictible."

Predictably, heaps of analysts' praise fall firmly on the shoulders of Amerman, who took over at the top three years ago. After the $113 million loss in 1987, Amerman trimmed 22 percent of Mattel's domestic work force, including 500 of its 1,800 employees at the Hawthorne headquarters. He also cut worldwide manufacturing by 40 percent.

"We were struggling, heavy and bloated," said Amerman of his first year. Since the cutbacks, Amerman's Mattel has whittled its debt from $285 million in 1987. When a $75 million payment of its senior subordinated debt is made on July 15, Mattel's long-term debt will stand at about $100 million, according to a company spokesman.

The turnaround at Mattel is reaching shareholders, including notable Richard Riordan, the downtown Los Angeles dealmaker who controls about 968,000 million shares of Mattel common. For the first time since 1983, Mattel will pay a quarterly dividend of 3 cents a share to shareholders of record on June 15, 1990.

"The action recognizes the consistent profitable growth which Mattel has achieved," Amerman said. "For the first quarter of 1990 we achieved a 95 percent increase in net income on a 20 percent increase in net sales, during a period when the toy industry was relatively flat."

Last month, Mattel reported net income of $8.4 million (17 cents a share) on revenues of $234 million for the first-quarter ended March 31, up from net income of $4.3 million (9 cents a share) on sales of $195.3 million in the first-quarter of 1989.

"Our momentum in terms of both volume and earnings growth continues," Amerman boasted. "Mattel's primary objective of consistent, predictable, profitable growth is being achieved."

New product development, scrapped as a primary focus during the turnaround, is back in gear at Mattel. With Barbie, Hot-Wheels and its proven nursery items producing profits, Mattel is gambling that new products can contribute new growth for the toy company. In a deal with Twentieth Century Fox licensing and merchandising, Mattel obtained the rights to develop and market products based on "The Simpsons" television series. Beginning this fall, Mattel will distribute action figures, vehicles and playsets, as well as dolls, based on cartoonist Matt Groening's characters.

While admittedly a departure from Mattel's sure-thing philosophy, Amerman said that Mattel can market hot products successfully.

"Selectively, we can take hot properties to market because of the safety we have with the stalwarts," he said. "And we think that `The Simpsons' franchise has real potential over the long term . . . I may be prejudiced because I like the show so much."

One recent Amerman deal linked Mattel with The Walt Disney Co. -- another company with the ultimate in staying power. In a 1987 meeting at the Bel Air Hotel, Amerman hammered out the crucial agreement with Barton K. Boyd, Disney Consumer Products chief executive, giving Mattel license to manufacture infant toys based on Disney characters. Sales of the new Disney line reached $55 million in 1988 and $135 million last year.

"The Disney deal re-established Mattel as a significant player in the pre-school business," said Gerard. "The buying decision for an infant or pre-school toy is made by Mom or Grandma and they understand that Disney license."

Clearly, the company is on the move, said Gerard. In fact, the company is scheduled to complete a two-mile relocation to a new corporate headquarters in El Segundo by the end of the year. The move worked out be an even-money swap. Mattel sold its land in Hawthorne to Manhattan Beach developer Comstock Crosser & Hickey for about $36 million. It bought its new 15-story office tower near the airport from Northern California-based developer Sutter Hill Partners for about $36 million.

"We got out of a depreciating lease-hold facility in Hawthorne and bought the new office tower," said Amerman, "converting our headquarters into an asset."

The next challenge for Mattel, said Amerman, is to increase worldwide sales of Mattel products.

"I believe in the potential of our international business," Amerman said. "There are more kids in Western Europe alone than there are in the U.S. One day, we'll be bigger there than here."

PHOTO : Upbeat: Amerman has new toys, new building