Mattel Toys (A): The Financial Realignment
When Robert A. “Bob” Eckert was named Chief Executive Officer (CEO) of Mattel Toys in May 2000, he found a company which many considered lost. Its former CEO, Jill Barad, who had brought Barbie back from the toy-dead in the 1990s and CEO since 1997, had been forced out months before as the company’s earnings had plummeted. The company was now losing roughly $1 million per day, and Barbie, the cornerstone of the company’s sales and profits for a decade, was aging. Mattel’s share price had plummeted from $46 per share in 1998 to a current low of $10.
Bob Eckert and his team had moved quickly to slash operating costs, divest massive money losers, refocus on core products and brands, all in the hope of reviving profitability. The financial and operational measures taken had been rapid and, in some cases, brutal. The market had been patient with Bob Eckert, but now, in the summer of 2004, four years after his entrance, it was time to review accomplishments and renew and revise expectations. The toy industry was infamously short-cycled, and many worried that Barbie, Hot Wheels, Fischer Price, and American Girl would no longer provide the growth Mattel needed. The business mantra of profitable growth was very real to Bob Eckert and Mattel.
This case has been used in both MBA and Executive Education programs to focus on the basics of financial analysis. Using publicly available information about a real and high-profile multinational corporation, the case requires students to (1) evaluate the financial results of the company over the past three-year period, and (2) then assess the degree to which the financial turnaround instituted by Mattel’s leadership—the so-called “Financial Realignment Plan”—has achieved what it set out to do. Critical to building a deeper understanding of corporate financial management and analysis are the specific actions and choices made under the Financial Realignment Plan. The case concludes with a discussion of the company’s returns to shareholders, and what would be needed for the returns generated by Mattel in the near future to meet market expectations.