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Mattel’s Barbie out of fashion with today’s girls

October 16, 2014, 11:53 AM UTC
A woman photographs a wall of Barbie dol
A woman photographs a wall of Barbie dolls in the Mattel display at the annual Toy Fair, February 14, 2010 in New York. AFP PHOTO/Stan Honda (Photo credit should read STAN HONDA/AFP/Getty Images)
Photograph by Stan Honda — AFP/Getty Images

Mattel (MAT) on Thursday reported a 22% drop in third-quarter profit. Here are the most important points from the earnings report.

What you need to know: Barbie is still struggling to resonate with today’s girls. Sales for the iconic doll slumped 21% in the latest quarter from a year ago, putting Barbie on track to report sliding sales for a third consecutive year. The doll’s sales already posted double-digit sales declines in the first two quarters of 2014.

What’s the problem? Well, Disney’s “Frozen” has become a juggernaut in the toy aisle this year. And while Mattel currently benefits from the Frozen craze (it makes the dolls based on that line and other Disney Princess properties), the company will soon lose that merchandising agreement. Hasbro (HAS) recently announced it won control of that partnership with Disney (DIS), and will start making those toys in 2016. Some analysts predict the Disney Princess line will contribute over $500 million to Mattel’s sales this year, so the lost contract is huge.

The big number: Worldwide sales dipped 8% to $2.02 billion, below the $2.17 billion projected by analysts surveyed by Bloomberg. The toy maker’s sales are more critical in the final two quarters of the year, so it is problematic for Mattel to report weak numbers as it heads into the key holiday season. Mattel’s poor performance in the first half of the year resulted in Danish-based Lego leapfrogging past it to become the world’s largest toy maker.

What you might have missed: Mattel’s other businesses reported choppy sales. Hot Wheels sales rose 5%, while the company’s preschool Fisher-Price brand posted a 16% drop in sales. The pricier American Girl doll segment, which has historically been a star performer in Mattel’s toy box, posted a 7% decrease in sales.