3 Keys to Mattel Inc's Turnaround Effort

By Danny VenaMarketsFool.com

Industry-leading toy company Mattel(NASDAQ: MAT) had a rough 2016. Its problems, however, started much earlier. Mattel's iconic Barbie has fallen out of fashion, and in September of 2014, the company also lost the licensing for the lucrative Walt Disney Princess line to rival Hasbro after being the sole beneficiary for nearly 20 years.

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After that stumble, Mattel's performance has suffered -- the shoes left by the Disney darlings have simply been too big for Barbie to fill. As a result, investors have been left wondering if Mattel's best days are behind it.

Barbie gets a makeover. Image source: Mattel.

Barbie gets a makeover

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Mattel isn't throwing in the towel and has been taking steps to reverse its slide. After years of promoting an unrealistic body type, Mattel has made a move that it hopes will revive sales of its once popular fashionista. Last year, Barbie was the recipient of a much needed makeover designed to broaden her appeal among a greater segment of the population.

Not only did those changes bring greater racial diversity but included multiple body types, in a move long sought by consumers. In addition to her traditional build, Barbie is now available in curvy, petite, and tall. She is also offered in seven skin tones, 22 eye colors, and 14 face shapes. In its press release, Mattel stated, "We are excited to literally be changing the face of the brand -- these new dolls represent a line that is more reflective of the world girls see around them -- the variety in body type, skin tones and style allows girls to find a doll that speaks to them."

High-tech digital companion

Aristotle voice-activated assistant and smart speaker system -- for kids!

The company has also made several moves designed to boost its technological prowess. The company partnered with Microsoft to incorporate its Cortana voice technology and Bing search into Aristotle,the toy maker's entry into the growing field of voice-activated personal assistants coupled with a multi-function smart speaker.

The key difference is that Aristotle is aimed squarely at a younger demographic: kids. It starts as a high-tech baby monitor that can stream video to a parent's phone and play soothing music for an infant. As the child grows, Aristotle uses voice recognition designed specifically for the speaking patterns of younger users and can answer questions, read stories, and be a digital companion. It also puts to rest any cybersecurity concerns by providing 256-bit encryption aimed at protecting user privacy.

Global aspirations

Mattel's recently hired CEO, Margaret Georgiadis, possesses a fairly substantial tech pedigree and global outlook, having recently served as President of Alphabet'sGoogle Americas since 2011. Additional duties at Google charged her with global sales operations and advertising in North and Latin America. Previous stints include chief operating officer of deals site Groupon and as chief marketing officer of Discover Financial Services. Her experience with international sales will no doubt act as a springboard to invigorate Mattel's global ambitions.

Recent headlines indicate that this strategy may already be in play. Mattel announced a partnership with Babytree, China's largest parenting website, to create online early childhood development tools for parents. The company is also developing interactive toys featuring artificial intelligence for Chinese consumers and will make its toys available for sale on e-commerce platformsin China.

These moves show that Mattel isn't wallowing in the loss of the Disney Princess collection. Reinvigorating its most popular brand, developing new high-tech toy offerings, and equipping itself for a global marketplace are signs that 2016 was a year of rebuilding at the toy giant, and the best may be yet to come.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's Board of Directors. LinkedIn is owned by Microsoft. Danny Vena owns shares of Alphabet (A shares), Mattel, and Walt Disney. Danny Vena has the following options: long January 2018 $80 calls on Walt Disney, short April 2017 $105 calls on Walt Disney, long January 2018 $640 calls on Alphabet (C shares), and short January 2018 $650 calls on Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Walt Disney. The Motley Fool has a disclosure policy.