Mattel 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

A disappointing conclusion to a otherwise good year

“The fourth quarter of 2013 was a disappointing conclusion to what had been a pretty strong year for Mattel.”

A transformative year for holiday sales

“From my perspective, the 2013 holiday period has to be one of the most transformative I’ve seen, particularly here in the United States. Consumers came out much later and less frequently to brick-and-mortar stores with ShopperTrak showing retail foot traffic in stores to be down as much as 15%.”

Consumers bought, but more deliberately, focused on deals

“And while consumers ultimately bought, they seem to have done a lot more online research than they had in the past, and they were more deliberate, focusing on discounts and deals.”

Part of it was our fault

“It was clear that our innovation and end market execution did not resonate with consumers enough to achieve our sales goals.”

But categories were weak

“U.S. NPD results showed the key categories we play in, dolls, infant preschool and vehicles, performed below the industry average. In the end, 2013 looked a lot like the past decade for toys with a relatively flat market in mature markets and growth in emerging and developing markets.”

Looking at the leverage points of the business

“Our long-term goal was to deliver a 6% to 8% profit growth, and that drives our TSR model so that we deliver the upper third, upper quartile TSR. The way that we think about that is we have a variety of levers to pull. Revenue is a lever. Gross margin is a lever. The middle of the P&L is a lever. And we approach every year a little bit differently trying to get an understanding of where we think opportunities are on each of those particular levers. Now if I look at 2013, we obviously thought that revenue was going to be a stronger lever for us.”

We just didn’t have the innovation

“with hindsight being 20/20, as we look at the innovation in our product line relative to competition out there, frankly, we just didn’t have the innovation. And that’s what’s hurt our share in Fisher-Price. And again, we were very disappointed in that.”

Hard for an endcap to work as well in 2013 as in 2012

“I think some of our promotional spending was not as effective. As we’ve been saying here, the store traffic is down 15%. It’s hard for an end cap to work as hard in 2013 as it did in 2012. So there’s a lot going on in terms of where we are in share.”