The Mattel Inc. logo is shown on June 8, 2023 outside the headquarters of the toy company known for products like Barbie and Hot Wheels in El Segundo, California.
Patrick T. Fallon | AFP | Getty Images
Activist investor Barington Capital is pushing Mattel to consider selling the American Girl and Fisher-Price brands, citing underperformance within the divisions.
Mattel shares rose about 3% in premarket trading Friday following a letter to Mattel Thursday, which was first reported by the Wall Street Journal. The share trading of the toy manufacturers is approximately at the same level as twenty years ago. Barington has an undisclosed stake in the company.
American Girl and Fisher-Price, two iconic brands, are among the most popular in their respective markets.
While the broader market has grown for the types of toys Fisher-Price makes, Barington's James Mitarotonda said in the letter to CEO Ynon Kreiz, Fisher-Price's sales have fallen from $1.9 billion in 2015 to less than a billion in 2023.
Mitarotonda said that if Mattel cannot stem the continued erosion of both Fisher-Price and American Girl, which have suffered similar declines, the company “may not be the right owner of these brands.”
Barington suggested the company should “immediately” explore strategic alternatives for these two segments.
“We believe these brands are now detracting from success in Mattel's other segments and harming shareholder value,” Mitarotonda said in a news release.
Mattel did not immediately return a request for comment.
The letter also points to “excessive” stock-based compensation that was higher than that of comparable companies, and alleges that Mattel continues to add stock-based compensation to the company's adjusted EBITDA – a practice that Barington' shocking'.
Barington also told Kreiz that the company should pause its ongoing merger and acquisition efforts in favor of a $2 billion stock buyback operation, which would be an expansion of the company's existing stock repurchase program and appoint chief executive Michael Dolan as chairman elevation, a position Kreiz currently holds.
Dolan is the former CEO of Bacardi, IMG and Young & Rubicam, an advertising agency.
Barington has run campaigns at Bath & Body Works, Darden Restaurants and Chico's. It was founded in 2000.