Mattel 2008 Annual Report Download - page 3

Regardless of industry or circumstance, 2008 was a most
challenging year. The myriad issues that affected the global
economy impacted everyone: Mattel’s investors, employees and
our supply chain partners. While Mattel’s performance was clearly
below expectations in 2008, we did make progress on several
strategically important fronts, which should augur well for your
company once the economy and consumer spending stabilize.
In 2008, consumer spending for discretionary items – like toys –
slowed considerably, and our retail customers tightly managed
their own inventories as the global recession continued to deepen.
Mattel’s revenues declined 1 percent for the year, with the entire
decline attributable to the holiday season as sales fell 11 percent
during the fourth quarter. We experienced sales shortfalls across
most of our brands and throughout many of the countries we
serve. Lower sales, combined with higher costs, resulted in
earnings per share of $1.05, which compares to $1.54 in 2007;
not a good year.
On the encouraging side, the toy industry performed relatively
well in 2008 compared to other categories, as it has done during
previous times of recession. And, for the full year and in the
all-important holiday season, we outperformed the competition
and increased our share of U.S. toy sales.
As we close a most difficult year, it is important to recognize a
few bright spots. First, American Girl® achieved record revenues.
The team’s success is a testament to prudent retail expansion
and terrific marketing.
Additionally, our creative teams continue to display industry-leading
innovation, and as a result, we have been awarded new toy
licenses for World Wrestling Entertainment’s WWE®, Disney/Pixar’s
Toy Story and HIT Entertainment’s Thomas & Friends™, which will
help the company grow in 2010 and beyond.
Our product quality and our oversight of vendor manufacturers
have improved. And lastly, we are winning the ongoing MGA
Entertainment litigation in which we have won (among other things)
a unanimous jury verdict against MGA and its CEO. While this has
been a long and expensive process, it is important to defend our
business on principle and expose a competitor’s wrongdoing.
In looking at 2009, the year will bring much excitement,
but also obstacles. We will need to roll up our sleeves and be
disciplined in our execution throughout the coming months.
The theme of this year’s report is “Deliver.” Companies that deliver
improved execution during the tough times will be the ones best
positioned to capitalize on the economic turnaround, which will
most certainly occur.
To deliver, we aim to improve execution across the supply chain
and throughout the company by realigning our infrastructure;
trimming our number of stock keeping units (SKUs); and
reducing capital spending by doing only business-critical projects
and doing them exceptionally well. The result should be
improved cash flow, which we intend to deploy to increase cash
balances, lower debt and continue to reward shareholders,
primarily through dividend payments.
To be successful in 2009, we also need to continue to bring magic
to the lives of children through innovative new toys, as well as the
revitalization of our classic and time-honored brands. This year,
we are celebrating an incredible milestone for the Barbie® brand.
For five decades, Barbie has inspired girls of all ages to dream,
discover and celebrate their girlhood. With 108 careers and
counting, Barbie is a constant reminder that girls can be whoever
they want to be. And 2009 represents a new chapter in the
Barbie brand’s history – one which will be our most exciting ever
to add to the Barbie legacy.
As corporate responsibility continues to play a central role in
how we operate, we are enthusiastic about the publication of our
third Global Citizenship Report, which will focus on our efforts to
create safe and high-quality products, ensure that employees
throughout our supply chain are treated fairly and achieve progress
on the management of our environmental impact. And we’ve been
recognized for our efforts by CRO Magazine which named
Mattel #7 on its 2009 “100 Best Corporate Citizens” list.
In economic downturns like this, charitable organizations are
squeezed by greater demand for services. While our giving
amounts will be impacted in 2009, our commitment to giving back
remains firmly intact through grantmaking and toy donations, as
well as our employee volunteer and brand-specific programs.
In order to manage successfully through difficult times, it is
important to have an engaged workforce. I am extremely proud
that, for the second consecutive year, FORTUNE Magazine has
named Mattel to its “100 Best Companies to Work For” list, moving
up 22 spots to rank among the top 50 best employers in the U.S.
Moving forward, our vision is unchanged: “The World’s Premier
Toy Brands – Today and Tomorrow.” Our agenda is clear:
deliver improved execution to position the company for the future.
Our promise is simple: reward investors, run the business well
and responsibly, and make kids’ lives fun.
Chairman of the Board and Chief Executive Officer
TO OUR SHAREHOLDERS: