Mattel, Inc. (MAT)
February 08, 2013 1:30 pm ET
Bryan G. Stockton - Chairman, Chief Executive Officer and Member of Equity Grant Allocation Committee
Kevin M. Farr - Chief Financial Officer
Sean P. McGowan - Needham & Company, LLC, Research Division
Linda Bolton-Weiser - B. Riley & Co., LLC, Research Division
Good afternoon, everyone, and welcome to Mattel's Analyst Day at the New York Toy Fair. Before we begin, I wanted to outline
Bryan G. Stockton
Good day, everyone, and thank you for braving the weather here in New York and joining us for toy fair. And for those of you who are joining us via webcast, welcome to Mattel.
Before I share my thoughts on our recent performance and the outlook for the future, I want to take a moment to thank and recognize Bob Eckert for his years of service in Mattel as its Chairman and CEO. His leadership has prepared Mattel for its next phase, which is the growth phase. He will be missed. He is missed, and we wish him well in his new endeavors.
As we reflect on our history and lessons learned, we know it's not enough to plan for growth. We must also plan to grow profitably because it's a combination of planning for growth and financial discipline that will always lead to success. That balance of growth and financial discipline continues to serve us well, with a 3-year annual total shareholder return or TSR of 27%, which puts us in the 91st percentile of the S&P 500. And over those 3 years, Mattel has generated about $2.5 billion in cash from operations and deployed over $2 billion in dividends and share repurchases and acquired HIT Entertainment, one of the best infant/preschool-branded companies in the world.
Similar to the last few years, our performance in 2012 is another great example of how Mattel can grow and grow profitably. We had record sales for both the total company and the international division, had eclipsed the $7 billion in total gross sales for the first time. We grew NPD share, both in the U.S. and in the Euro 5, and we had strong gross margins, all of which resulted in our second year of over $1 billion in operating profit and adjusted EPS growth of 13%.
We accomplished all of this while investing in our future with investments like our acquisition of HIT Entertainment and its collection of great brands and talent, the expansion of our American Girl retail stores, updating our manufacturing and IT infrastructure, which allows us to continue to deliver strong margins, expanding digital, which helps us to broaden the appeal of our brands and improve our connection with our consumer, whether it be in toy innovation, content, websites, webisodes, games, apps or social media.
Last year, I laid out a long-term roadmap on how we would continue the success that we had today. This roadmap on how we will grow requires us to develop and execute a plan for growth, develop a structure to enable that growth, nurture our talent base and develop a culture of innovation.
I also outlined areas upon which we will focus our growth, the -- where we will grow, which are -- grow our core businesses, launch new franchises, optimize our entertainment partnerships and expand and strengthen our international footprint. Our great portfolio of brands, countries and customers allow us to adjust these levers every year as we work to deliver our long-term goals.
And as I look at our 2012 performance in more detail, I am pleased with the progress that we made along this journey. Our momentum was led by our own brands and driven by the momentum in our girls portfolio.
Well, according to NPD, Barbie continues to be the #1 doll property. In 3 short years, Monster High has become the #2 doll property worldwide and in 2012 grew to a $1 billion brand at retail.
American Girl grew double digits in 2012 despite a challenging economy here in the U.S., and all of the brands in our fashion doll portfolio are bigger today than they were in 2010 before we launched Monster High.
Also in 2012, Hot Wheels grew with its successful Team Hot Wheels campaign and continued to focus on core vehicles, play sets and track sets.
Fisher-Price continued its transition from a U.S.-centric business to a global brand leader, with sales growing faster internationally in 2012.
Our acquisition of HIT Entertainment in February 2012 gave us our fifth core brand, Thomas, which is accelerating growth within our Fisher-Price portfolio.
And internationally, where gross sales grew 4% to $3.1 billion, we achieved over $1 billion in gross sales in Latin America, continued our growth in Asia, anchored by China and India, and grew the European region despite the difficult economic challenges we kind of faced.
And while all of those results are impressive, we also continued to make progress in our organization structure, our talent and our culture. Following the lead of our international division, we recently reorganized our North America operations and created our global brands team and our North America division, all of which helped us to deliver our results.
The GBT worked together with international and the NAD to build deeper brand relationships with our consumers globally. This allowed the NAD and international organizations to work even more closely with our retail partners, especially during the all-important holiday season.
I often say that Mattel is the home to the best talent in the toy industry. In 2012, we added or rotated some outstanding leaders to our executive team. In February, we promoted Jean-Christophe Pean, a proven leader in our international business to lead the transition of our U.S. operations into the North America subsidiary.
Also in February, we added the incredible team at HIT Entertainment to our Mattel family, allowing us to leverage their talents in content creation, distribution and consumer product licensing.
In April, we announced the promotion of Jean McKenzie, a long-time Mattel and Disney Executive, to run our American Girl business upon the retirement of Ellen Brothers.
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