Business
Problems at Mattel: Despite 'Barbie' success, its stock is a dud. Now an activist investor is circling
If “Barbie” is awarded best picture at next month’s Academy Awards, it would only crown what has been an unprecedented moment for the world’s No. 1 selling doll.
The glossier half of the “Barbenheimer” sensation not only brought in nearly $1.5 billion at the global box office, but also renewed the cachet of a toy old enough to be Medicare eligible next month — earning Mattel some $150 million, including doll sales and other revenue streams last year.
It all seemed to validate the toy maker’s strategy of turning its legacy brands into modern media properties, with more than a dozen other live-action films coming up.
“Our job is to take brands that are timeless and make them timely,” is how Mattel Chairman and Chief Executive Ynon Kreiz put it in an interview.
Yet the El Segundo company is not feeling much affection from investors. (Nope, Mattel is not based in the film’s imposing Century City high-rise.) After surging during the pandemic, the company’s stock performance has been middling, despite a surge after “Barbie” was released and the recent stock market rally.
This has caught the attention of an activist investor, which is pressuring Mattel to change course and better reward its shareholders.
The New York hedge fund Barington Capital Group isn’t calling for Barbie to be put on the auction block, but the same can’t be said for two of its other top brands: Its line of premium-priced American Girl dolls and its iconic Fisher-Price line of baby, toddler and preschool toys.
The marquee of the Los Feliz Theater features the films “Barbie” and “Oppenheimer,” last year.
(Chris Pizzello / Associated Press)
Barington, which kicked off its campaign with a Feb. 1 letter to Kreiz, is also taking aim at Mattel’s executive compensation and governance structure, while calling for $2 billion in stock buybacks to provide a better return for investors. It hasn’t disclosed its stake in the company.
“We want to enhance value for all of the shareholders and owners of the company, including the management team,” said James Mitarotonda, chairman of Barington. “The company needs to either fix the businesses or sell them.”
Barington calculated that Mattel’s stock fell 13.2% in the two years preceding its letter, underperforming the Standard & Poor’s 500 index by more than 20%. Shares of Mattel have risen about 7% during February’s stock rally, closing at $19.61 on Tuesday. The stock hit a high of $26.97 during Kreiz’s tenure in May 2022.
Mattel’s got big people behind these other movies but you can’t assume these properties are going to be blockbusters
— Jim Chartier of Monness Crespi Hardt
The hedge fund doesn’t have as high a profile as some other shareholder activists, such as Carl Icahn or Nelson Peltz, who is currently battling Disney. Barington, though, has waged roughly 100 campaigns, Mitarotonda said, including convincing L Brands, which is now Bath & Body Works, to spin off Victoria’s Secret as a separate company.
In response to the campaign, Mattel said it was looking “forward to engaging with Barington as we do with all our shareholders. We welcome this initial outreach and we are reviewing their letter.” Mitarotonda said Barington has since had “positive” discussions with Kriez but declined to discuss them in detail.
Given the unprecedented success of “Barbie,” Mattel seems an unlikely target for an activist investor.
Despite past turmoil in the toy industry and stiff competition from digital games, the company has experienced a comeback since Kreiz took over in 2018 — a year when the company posted a $1-billion loss. Barington acknowledged that, pointing to the company’s higher margins, lower debt leverage and $700 million growth in annual revenue by the third quarter of last year.
“We recognize the meaningful improvements that you and your team have delivered over the last six years,” the letter stated.
However, the big growth in net sales was achieved in 2021 when parents were still saying home en masse with their kids. Since then, annual net sales have flatlined at $5.4 billion while annual net income declined about 75% over the three years to $214 million last year, according to FactSet. For the fourth quarter, the company reported a 16% increase in net sales, with sales flat for all of 2023.
Mattel wasn’t the only company hit by the toy industry’s soft 2023, which saw a 7% sales decline in 12 global markets, according to Circana. The consumer data analyst cited inflation and the continuing challenge of lower birth rates as issues. Mattel rival Hasbro, the maker of Transformers and G.I. Joe, reported a fourth-quarter decline in revenue and higher losses, sending shares skidding.
An Israeli native and UCLA business school graduate, Kreiz, 58, previously led YouTube content producer Maker Studios, which Disney acquired in 2014. He also had worked for Haim Saban, who made billions of dollars on the Power Rangers franchise. Kreiz was Mattel’s chairman when he was named chief executive, becoming the fourth person to hold the CEO title since 2012.
From the start, Kreiz’s goal was to supercharge Mattel’s lagging efforts to become a higher-valued entertainment company. That meant reviving efforts to get Barbie a starring role. The broader strategy includes television, digital games, publishing and consumer products. Mattel also is opening a small theme park in suburban Phoenix.
“Barbie” succeeded beyond Mattel’s wildest expectations after Kreiz gave unusual creative control to director Greta Gerwig. (That choice paid off at the box office, but it didn’t do Kreiz any favors considering the film’s less-than-flattering portrayal of Mattel’s corporate chief by comedian Will Ferrell).
The company’s slate of films includes an upcoming Barney motion picture produced by Academy Award winning actor Daniel Kaluuya, a Hot Wheels movie by blockbuster producer J.J. Abrams and a Rock ‘Em Sock ‘Em Robots movie starring Vin Diesel.
It appears to be a formula for continued success, though analyst Jim Chartier of Monness Crespi Hardt & Co. said it’s important to remember the truism: There’s no guarantees in Hollywood. He noted how Mattel rival Hasbro had a hit with its 2007 “Transformers” film but couldn’t duplicate that with some other properties.
“Mattel’s got big people behind these other movies but you can’t assume these properties are going to be blockbusters,” said Chartier, who has a “buy” rating on Mattel and a $26 price target.
Still, no one is doubting the long-established toy industry strategy of courting Hollywood — the issue Barington has is with the other two big brands.
Mattel’s infant, toddler and preschool segment, which includes Fisher-Price, has experienced a more than 40% decline in annual revenue since 2015 through the third quarter of last year, even as global revenue for such toys grew, according to Barington’s letter. Similarly, it said, American Girl’s annual revenue fell 61% since 2016, even as global doll revenue grew.
Barington calculated that without those sales declines, Mattel would have nearly doubled its four-year revenue growth rate. The investor suggested selling the businesses. “Mattel may not be the right owner of these brands,” its letter stated.
Mattel acquired Fisher-Price in 1993 and, according to the company, it remains the bestselling infant and preschool brand in the world. Even before Barington’s letter, Mattel announced a shake-up at Fisher-Price, telling employees in January that the toy line’s general manager and global head of infant and preschool, Chuck Scothon, would be leaving after six years at the helm.
The American Girl line of premium large dolls, which feature multiple collections, generally are priced at more than $100. The dolls are sold online and at major retailers, while Mattel operates retail boutiques, including in Los Angeles, where kids can hold parties, receive salon services and share tea time with their dolls.
Analyst Linda Bolton Weiser of D.A. Davidson said she thinks it’s more likely that Mattel would sell American Girl than Fisher-Price, since the doll line suffers from lower-priced competition.
(Target, for example, sells an exclusive line of rival dolls called Our Generation that can cost a quarter of the price.)
Mattel shows no signs of abandoning the doll line it acquired in 1998. It is developing a film with Paramount for the big screen, and during comments Kreiz made in response to Barington’s letter on the Feb. 7 earnings call, he said Mattel is “very confident in the long-term value of American Girl.”
Mattel’s earnings announcement also stated that its board had approved a $1-billion share repurchase after buying back $203 million worth of shares in 2023. And the company announced two new directors with experience in media, tech and finance. Kreiz cautioned against reading into those developments. “These are things that we take our time to consider and analyze,” he said during the earnings call.
Mitarotonda called the $1-billion share buyback a “good start” and said he was “looking forward to more” in the future.
Barrington also has taken issue with Mattel over alleged excessive stock-based compensation to the management team. It said in its letter that Kreiz received $29.8 million in such compensation from 2020 through 2022, which was 44% higher than the median aggregate of what his peer chief executives received during that period.
“Barbie” director Greta Gerwig and Mattel Chief Executive Ynon Kreiz are seen at the 2024 Oscars Nominees Luncheon at the Beverly Hilton Hotel this month.
(Jason Armond / Los Angeles Times)
Kreiz’s total compensation in 2022 was $11.9 million, including a base pay of $1.5 million, stock awards of $7.69 million and stock options of $2.56 million, according to a regulatory filing.
Weiser said that Kreiz has done an “excellent job” in a difficult industry. “He brought the company back from the brink of bankruptcy,” she said.
The criticism of Kreiz’s compensation was based on a peer group developed by the company to set its own compensation, Mitarotonda said, adding the fund’s letter didn’t note how the group appears stacked with higher-revenue companies, minimizing how excessive the stock awards actually were. Hershey, Live Nation and Campbell Soup are among the members.
In regards to governance, Barington wants Kreiz to step down from his board chairmanship. Splitting the role from his chief executive duties are a fundamental principle of good corporate governance, Mitarotonda said, likening it to the checks and balances system enshrined in the U.S. Constitution.
“Does good governance create value in and of itself? No, it does not. But it does set the right culture in order for you to have a good management team that does deliver the right results,” he said.
Mattel is forecasting flat sales but profit growth this year as it continues to cut costs. Global toy sales are expected again to be soft, though not as poor as 2023.
The company plans an investor day March 7 when it is expected to roll out new products. During the earnings call, Kreiz said that this year it will expand Fisher-Price’s core product lines and introduce an “exciting new segment.”
Mitarotonda said he is eager to hear any company initiatives regarding Fisher-Price and American Girl.
“Part of what we wanted to make sure is that they have a compelling plan to improve these businesses,” he said.
Business
Defiant independence from the Federal Reserve catches Trump off guard
WASHINGTON — White House officials were caught by surprise when a post appeared Sunday night on the Federal Reserve’s official social media channel, with Jerome Powell, its chairman, delivering a plain and clear message.
President Trump was not only weaponizing the Justice Department to intimidate him, Powell said to the camera, standing before an American flag. This time, he added, it wasn’t going to work.
The lack of any warning for officials in the West Wing, confirmed to The Times, was yet another exertion of independence from a Fed chair whose stern resistance to presidential pressure has made him an outlier in Trump’s Washington.
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Powell was responding to grand jury subpoenas delivered to the Fed on Friday related to his congressional testimony over the summer regarding construction work at the Reserve.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions,” he added, “or whether instead monetary policy will be directed by political pressure or intimidation.”
For months, Trump and his aides have harshly criticized Powell for his decision-making on interest rates, which the president believes should be dropped faster. On various occasions, Trump has threatened to fire Powell — a move that legal experts, and Powell himself, have said would be illegal — before pulling back.
The Trump administration is currently arguing before the Supreme Court that the president should have the ability to fire the heads of independent agencies at will, despite prior rulings from the high court underscoring the unique independence of the central bank.
The decision by the Justice Department to subpoena the Fed over the construction — a $2.5-billion project to overhaul two Fed buildings, operating unrenovated since the 1930s — comes at a critical juncture for the U.S. economy, which has been issuing conflicting signals over its health.
Employers added only 50,000 jobs last month, fewer than in November, even as the unemployment rate dipped a tenth of a point to 4.4%, for its first decline since June. The figures indicate that businesses aren’t hiring much despite inflation slowing down and growth picking up.
The government reported last month that inflation dropped to an annual rate of 2.7% in November, down from 3% in September, while economic growth rose unexpectedly to an annual rate of 4.3% in the third quarter.
However, the long government shutdown interrupted data collection, lending doubt to the numbers. At the same time, there is uncertainty about the legality of $150 billion or more in tariffs imposed on China and dozens of countries through the International Emergency Economic Powers Act, which has been challenged and is under review by the Supreme Court.
As inflation has cooled, the Fed under Powell has incrementally cut the federal funds rate, the target interest rate at which banks lend to one another and the bank’s primary tool for influencing inflation and growth. The Fed held the rate steady at a range of 4.25% to 4.5% through August, before a series of fall cuts left it at 3.5% to 3.75%.
That hasn’t been enough for Trump, who has called for the rate to be lowered faster and to a nearly rock bottom 1%. The last time the central bank dropped the rate so low was in the dark days of the early pandemic in March 2020. It began raising rates in 2022 as inflation took off and proved stubborn despite the bank’s efforts to rein it in.
Mark Zandi, chief economist at Moody’s Analytics, said there is room to continue lowering the federal funds rate to 3%, where it should be in a “well functioning economy, neither supporting or restraining growth.”
However, muscling the Fed to lower rates and reduce or destroy its independence is another matter.
“There’s no upside to that. It’s all downside, different shades of gray and black, depending on how things unfold,” he said. “It ends in higher inflation and ultimately a much diminished economy and potentially a financial crisis.”
Zandi said much will hinge on the Supreme Court’s decision on whether Trump can remove Federal Reserve Governor Lisa Cook, which he sought to do last year, citing allegations of mortgage fraud she denies.
While Powell’s term as chairman ends in May, his term as a governor — influencing interest-rate decisions — extends to January 2028. A criminal indictment over the construction project could provide Trump the legal justification he needs to remove him altogether.
“When he steps down in May, will he stay on the board or does he leave? That will make a difference,” Zandi said.
A key issue will be how much independence the Fed retains, he said, given the central bank’s role in establishing the U.S. as a safe haven for international bond investors who play a key role funding the federal deficit.
The investors rely on the bank to keep inflation under control, or they will demand the government pay more for its long term bonds — though the subpoenas had little effect so far Monday on bond prices.
“There are scenarios where the bond market says, ‘Oh my gosh, we’re going to see much higher inflation, and there’s a bond sell-off and a spike in long-term rates,” he said. “That’s a crisis.”
Zandi said that even if the worst-case scenarios don’t play out, it will take time for the Federal Reserve to reestablish its reputation as an independent bank not influenced by politics.
“I’m not sure investors will ever forget this,” he said. “Most importantly, it depends on who Trump nominates to be the next chair of the Federal Reserve — and how that person views his or her job.”
Lawmakers from both parties have questioned the motivation behind the investigation.
North Carolina Sen. Thom Tillis, a Republican member of the Senate Committee on Banking, Housing and Urban Affairs, has said he plans to oppose the confirmation of any nominee for the Fed until the legal matter is “fully resolved.”
“If there were any remaining doubt whether advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis wrote in a social media post.
Sen. Elizabeth Warren, the top Democrat on that committee, accused Trump of trying to “install another sock puppet to complete his corrupt takeover of America’s central bank.”
“Trump is abusing the authorities of the Department of Justice like a wannabe dictator so the Fed serves his interests, along with his billionaire friends,” Warren said in a statement.
Rep. French Hill (R-Ark.), the chairman of the House Financial Services Committee, also expressed skepticism about the inquiry, which he characterized as an “unnecessary distraction.”
“The Federal Reserve is led by strong, capable individuals appointed by President Trump, and this action could undermine this and future Administrations’ ability to make sound monetary public decisions,” Hill wrote in a statement.
As Hill raised concerns about the investigation, he added he personally knew Powell to be a “person of the highest integrity.”
House Speaker Mike Johnson (R-La.), meanwhile, dismissed the idea that the Justice Department was being weaponized against Powell. When asked by a reporter if he thought that was the case, he said: “Of course not.”
Times staff writers Wilner and Ceballos reported from Washington and Darmiento from Los Angeles.
Business
Mattel introduces its first Barbie with autism, headphones on and fidget spinner in hand
Mattel is releasing its first autistic Barbie doll.
Created in partnership with the Autistic Self Advocacy Network (ASAN), the toy launched Monday is meant to represent children with autism spectrum disorder and how they experience the world.
The doll joins the Barbie Fashionistas line, which features more than 175 looks across various skin tones, body types and disabilities.
Previous additions include Barbie dolls with Type 1 diabetes, Down syndrome and blindness.
The Barbie with autism was in development for more than 18 months. ASAN, the nonprofit disability rights organization run by and for the autistic community, provided guidance as to how the doll can most accurately represent the various experiences people on the autism spectrum may relate to and celebrate the community.
The toy features elbow and wrist articulation, which allows for stimming and other gestures. Her eyes are shifted to the side to avoid eye contact.
She carries a fidget spinner and a tablet. She also wears noise-canceling headphones and a loose-fitting dress that allows for less fabric-to-skin contact.
To celebrate the new doll, Mattel is donating more than 1,000 autistic Barbies to pediatric hospitals across the country that offer specialized services for children on the spectrum. According to the autism nonprofit, Autism Speaks, one in 31 children and one in 45 adults in the U.S. has autism.
“Barbie has always strived to reflect the world kids see and the possibilities they imagine, and we’re proud to introduce our first autistic Barbie as part of that ongoing work,” said Jamie Cygielman, global head of dolls at Mattel, in a press release.
She added that the doll “helps to expand what inclusion looks like in the toy aisle and beyond because every child deserves to see themselves in Barbie.”
The toymaker’s investments in diversity and representation have proved commercially successful.
The Fashionistas line launched in 2009 and has provided the opportunity to create dolls beyond Barbie’s original look. In 2024, the most popular Fashionistas dolls globally included the blind Barbie and the Barbie with Down syndrome. The wheelchair-using doll has also consistently been a top performer since its debut in 2019.
Founded in 1945, Mattel started out of a Los Angeles garage. Over the last 80 years, the El Segundo-based company cemented itself as a multibillion-dollar toy company with products and brands like Fisher-Price, Hot Wheels cars and American Girl.
The new autistic Barbie is available starting Monday through Mattel Shop and retailers nationwide.
Business
Kanye West sues ex-employee over Malibu mansion lien
Kanye West, the rapper now known as Ye, is suing his former project manager and his lawyers, alleging they wrongfully put a $1.8-million lien on his former Malibu mansion.
The suit, filed in Los Angeles Superior Court on Thursday, alleges that Tony Saxon, Ye’s former project manager on the property, and the law firm West Coast Trial Lawyers, “wrongfully” placed an “invalid” lien on the property “while simultaneously launching an aggressive publicity campaign designed to pressure Ye, chill prospective transactions, and extract payment on disputed claims already being litigated in court.”
Saxon’s lawyers were not immediately available for comment.
Saxon, who was also employed as West’s security guard and caretaker at the Malibu property, sued the controversial rapper in Los Angeles Superior Court in September 2023, claiming a slate of labor violations, nonpayment of services and disability discrimination.
In January 2024, Saxon placed the $1.8-million “mechanics” lien on the property in order to secure compensation for his work as project manager and construction-related services, according to court filings.
A mechanics lien, also referred to as a contractor’s lien, is usually filed by an unpaid contractor, laborer or supplier, as a hold against the property. If the party remains unpaid, it can prompt a foreclosure sale of the property to secure compensation.
Ye has denied Saxon’s allegations. In a November 2023 response to the complaint, Ye disputed that Saxon “has sustained any injury, damage, or loss by reason of any act, omission or breach by Defendant.”
According to Ye’s recent complaint, he listed the property for sale in December 2023. A month later, he alleged, Saxon and his attorneys recorded the lien and “immediately” issued statements to the media.
The suit cites a statement Saxon’s attorney, Ronald Zambrano, made to Business Insider: “If someone wants to buy Kanye’s Malibu home, they will have to deal with us first. That sale cannot happen without Tony getting paid first.”
“These statements were designed to create public pressure and to interfere with the Plaintiffs’ ability to sell and finance the Property by falsely conveying that Defendants held an adjudicated, enforceable right to block a transaction and divert sale proceeds,” the complaint states.
The filing contends that last year the Los Angeles Superior Court granted Ye’s motion to release the lien from the bond and awarded him attorneys fees.
The Malibu property’s short existence has a long history of legal and financial drama.
In 2021, West purchased the beachfront concrete mansion — designed by Pritzker Prize-winning Japanese architect Tadao Ando — for $57.3 million. He then gutted the property on Malibu Road, reportedly saying “This is going to be my bomb shelter. This is going to be my Batcave.”
Three years later, the hip-hop star sold the unfinished mansion (he had removed the windows, doors, electricity and plumbing and broke down walls), at a significant loss to developer Steven Belmont’s Belwood Investments for $21 million.
Belmont, who spent more money to renovate the home, had spent three years in prison after being charged with attempted murder for a pitchfork attack in Napa County. He promised to restore the architectural jewel to its former glory.
However, the property has been mired in various legal and financial entanglements including foreclosure threats.
Last August, the notorious mansion was once again put on the market with a $4.1 million price cut after a previous offer reportedly fell through, according to Realtor.com.
The legal battle surrounding Ye’s former Malibu pad is the latest in a series of public and legal dramas that the music impresario has been involved in recent years.
In 2022, the mercurial superstar lost numerous lucrative partnerships with companies like Adidas and the Gap, following a raft of antisemitic statements, including declaring himself a Nazi on X (which he later recanted).
Two years later, Ye abruptly shut down Donda Academy, the troubled private school he founded in 2020.
Ye, the school and some of his affiliated businesses faced faced multiple lawsuits from former employees and educators, alleging they were victims of wrongful termination, a hostile work environment and other claims.
In court filings, Ye has denied each of the claims made against him by former employees and educators at Donda.
Several of those suits have been settled.
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