• by Sarah Mahoney  @mahoney_sarah, July 27, 2023

The boffo box-office performance of “Barbie” has the Mattel executive team taking some well-deserved bows. But while the company gained market share in its second quarter, sales and profits fell. Its president just left to run Gap Inc. And some observers think all the movie hype might create problems down the line.

Sales at the El Segundo, California-based company fell 12% to $1.09 billion. In North America, they dropped 18%. And net income tumbled to $27 million, compared to $66 million in the prior year.

Still, the company reiterated its forecasts for the full year, attributing many of its issues to retailers still trying to recalibrate after several years of inventory disruptions.

On a call webcast for investors, Mattel execs dwelt extensively on the importance of “Barbie,” the company’s partnership with Warner Brothers, and the potential of other projects.

“It’s more than a movie,” said Ynon Kreiz, chairman and chief executive officer of Mattel. “It is a cultural phenomenon.”

Kreiz said the success speaks to the resonance of Mattel’s intellectual properties and bodes well for films in development. That cultural imperative also includes TV, with the recent launch of “Barbie’s Dream House Challenge” -- a four-part series on HGTV -- performing well, and music, with the release of an album linked to “Barbie.” That includes songs by such stars as Billie Eilish, Lizzo, Sam Smith, Dua Lipa and Nicki Minaj.

During the call, Kreiz also announced new appointments following the surprise departure of Richard Dickson, president and chief operating officer, now headed to Gap as its new CEO.

Lisa McKnight moves up to Mattel’s executive vice president and chief brand officer, overseeing all toy categories and global brands and design and development. A 25-year Mattel veteran, she has been in charge of Barbie since 2016 ,and all dolls since 2019.

Mattel also promoted Josh Silverman to executive vice president and chief franchise officer from global head of consumer products. He joined the company in 2022, following 20 years at Disney.

Silverman and McKnight assume Dickson’s duties and will report directly to Kreiz.

The main question, observers say, is just how much families are reining in spending.

Mattel’s sales did better than expected, says Jaime Katz, an analyst who follows the company for Morningstar.  She had been braced for an 18% decline instead of the 12% Mattel reported. Still, she anticipates that the positive momentum from all that Barbie buzz may be “held back by a weakening consumer. Notably, point of sale fell at a high-single-digit clip in the second quarter, and Mattel disclosed industry softness.”

Katz sees sales weakness as a function of uncertain macroeconomic trends rather than problems with Mattel’s key brands. And she predicts healthy top-line growth in the low-double-digits.

But there are some potential downsides to Mattel’s current box-office glory.

“While Mattel has done a tremendous job raising the visibility of the Barbie brand, implying success in its plan to elevate its intellectual property, we don’t foresee the other 14 films set for release soon, which could cause some buzz to fizzle,” Katz says. “This could pose a problem in 2024 when Mattel is lapping elevated movie-related Barbie sales.”