Game Over for Struggling Mattel CEO

Mattel Inc. Chief Executive Bryan Stockton abruptly resigned Monday, as another disastrous holiday season showed his recent efforts to revive the creative culture at the world’s largest toy company didn’t do the trick. The company tapped longtime board member Christopher Sinclair to serve as interim CEO and launched a search for a permanent leader. Mr. Sinclair will also take over Mr. Stockton’s title of chairman. ENLARGE Mattel didn’t have any standout toys this holiday season, and a big bet on clustering its marketing spending closer to Christmas didn’t appear to make enough of a difference. Profit during the holiday quarter fell 59% from a year earlier to $149.9 million, as sales dropped 6% to $1.99 billion. The results were the last straw after several quarters of declining sales. “Our result were not meeting our expectations and the board felt that a leadership change was in order,” Mattel spokesman Alex Clark said. Advertisement Mattel declined to make Mr. Stockton available, and he didn’t respond to requests for comment. Mr. Stockton took the CEO job three years ago after more than a decade at Mattel. Prior to that, he spent more than two decades in the food business at companies including Kraft. People inside the company and at several large retailers said his tenure was marked by a growing focus on the numbers and overseas expansion—at the expense of the Mattel’s creative side. Meanwhile, the explosive growth of the iPad had created a big new rival for kids’ attention. According to current and former executives, Mattel’s executives needed to be thinking up better toys. Instead, they became entangled in a culture that valued endless meetings and long PowerPoint presentations. Meanwhile, smaller competitors like VTech Holdings Ltd. were taking shelf space, and Lego A/S was challenging Mattel’s position as the largest toy company. Some retailers found that Mr. Stockton wasn’t as involved in toy selection as counterparts at rivals such as Hasbro and Lego. He rarely accompanied retailers on tours of Mattel’s showrooms that showed off products for the coming year, according to former Mattel executives and retail executives. The CEO recently changed tack and scheduled more meetings with the top U.S. toy retailers, a person familiar with the matter said. In addition, he delivered an edict late last summer trying to speed up decision-making and free up executives by putting rules around meetings—including one that said no meeting is to be held without a specific purpose. Mr. Stockton also has made some important hires aimed at empowering the creative side. Last year, Richard Dickson, a Mattel veteran who led Barbie’s turnaround in the early part of this decade, was rehired as chief brands officer. The efforts have been too little, too late, however. With its results weakening, Mattel is preparing for another major round of belt-tightening. In October, it announced plans to cut another $250 million to $300 million in annual costs. Mr. Stockton said in November that includes eliminating redundant layers of management. The process for culling jobs has already started. Last Friday, Mattel offered early-retirement packages to eligible employees. The two top internal candidates for the CEO job likely will include Mr. Dickson, as well as Tim Kilpin. Both were named president two weeks ago. Analysts, however, expect Mattel to strongly consider someone from outside the company, if not outside the toy industry entirely. Mr. Sinclair has served on the toy company’s board since 1996. He said Monday that Mattel will work through the coming months to revitalize its business and find the right leader. Mattel has struggled in recent quarters as its Barbie doll has fallen out of style. Sales of the fashion doll fell a staggering 21% in the third quarter, contributing to a 22% drop in profits and an 8% decline in sales for the toy maker. Barbie once generated around $1.8 billion in annual sales. In the 12 months through September, the total was just over $1 billion. (Source WSJ)

Turnaround Tommy: How Hilfiger’s Once-Dead Brand Had Its Biggest Year Ever

In Manhattan’s cavernous Park Avenue Armory the thrum of the Rolling Stones’ “Sympathy for the Devil” blared as Mick Jagger’s 22-year-old supermodel daughter, Georgia, sashayed down the catwalk. Vogue’s Anna Wintour was in the front row. So were the daughters of rock royalty like Keith Richards, Simon Le Bon and Annie Lennox, firing off shots on Instagram (#tommyspring15). Kendall Jenner of clan Kardashian closed out the show strutting in a sheer, braless dress, driving her 25 million social media followers wild. The message of Tommy Hilfiger’s New York Fashion Week show was as transparent as Jenner’s top: After a long and painful fall, he’s back. Once the official outfitter of the ’90s hip-hop set, hitting $2 billion in sales in 2000, Hilfiger’s business imploded amid a sea of overexposure and baggy, logoed merchandise that fast fell out of fashion. “We made the mistake of following a trend that was going to be short-lived,” says Hilfiger, 63, “because any trend is short-lived.” But now the brand is hot once again thanks to a pair of savvy European businessmen: Daniel Grieder, 53, Tommy Hilfiger’s immaculately groomed Swiss CEO, and his Dutch predecessor, Fred Gehring, 60, both former stewards of the Hilfiger brand abroad. And while they’re longtime Tommy loyalists, they’re brutally honest about the mess they inherited. “It fell off a cliff,” Gehring says of the American part of the business. They bought the company with the help of London-based private equity firm Apax Partners in 2006 for $1.6 billion. To save Tommy Hilfiger they’re breaking all the rules of modern retail: raising prices, tailoring clothes smaller, alienating customers and cutting off stores. It’s a counterintuitive strategy, but it’s working. Worldwide revenues hit a record $3.4 billion in 2013, up 7% from the year before (for perspective, sales were $1.8 billion in 2005, during the brand’s slump). Cash flow as defined by earnings before interest and taxes increased 10% to $479 million, with growth not just in the expected emerging markets of Asia and South America but in Europe and North America, too, where competitors like Michael Kors and Hugo Boss have struggled. “At first glance you wouldn’t recognize how this brand has come from the depths,” says Brian Sozzi, retail analyst and CEO at Belus Capital Advisors. “They’ve peeled back on distribution. The quality has improved. And I think they’ve broadened out who that Tommy Hilfiger customer is.” Hilfiger’s is a legendary fashion success story–or at least it was for a while. After starting out in the late ’60s selling bell-bottom jeans and hippie threads on college campuses near his hometown of Elmira in upstate New York, Tommy Hilfiger became the first fashion company to float on the New York Stock Exchange, raising $47 million in 1992 while clocking $107 million in sales ($80 million and $180 million in 2014 dollars, respectively). By the mid-1990s Tommy Hilfiger’s oversize jeans and puffer jackets became the teen uniform of the era. “All the preppies, all the cool kids, the surfers, the skateboarders–everyone was wearing it,” he says today, perched on a leather couch in his company’s Fifth Avenue flagship store. A 16-year-old Beyoncé and her group, Destiny’s Child, wore his denim overalls over logo bikini tops to a 1998 photo call. The designer dressed the 17-year-old breakout star of the day, Britney Spears, for her “Baby One More Time” tour in 1999. But by 2000, when revenues reached the $2 billion mark, Hilfiger had gotten greedy. What started as a preppy menswear label making colorful button-downs was now selling $20 T-shirts, accessories, perfume, sunglasses, bags, homewares. His nautical flag logo was a mainstay of down-market department stores. The company’s wholesale business–the sale of red, white and blue ephemera to Belk, Kohl’s, Dillard’s and anywhere that would take it–swelled to $1.5 billion in 2000. Worse than market oversaturation was the brand’s descent into promotions, a dirty word in high-end retail that means “always on sale.” “It had become so bad that a shirt that was going to have a retail price of $69 was designed in such a way that even at markdown at $39 it would still make money,” says Gehring. By 2005 wholesale sales had slowed to $500 million. Even in Middle America, where Hilfiger’s inventory once thrived, no one wanted cut-rate Tommy T-shirts. Hilfiger felt it was his duty to figure out the next move for his floundering company, he says. “In reality the answer was sitting right in front of us. It was in Europe.” Daniel Grieder and Fred Gehring inside Tommy Hilfiger’s Fifth Avenue, NY flagship. Photo: Jamel Toppin For Forbes Daniel Grieder and Fred Gehring inside Tommy Hilfiger’s Fifth Avenue, NY flagship. Photo: Jamel Toppin For Forbes Indeed, under Gehring and Grieder the European business had grown from zero in 1997 to just under a billion in 2008 without any trace of the enormous logos and cheap price tags that defined Tommy Hilfiger in the U.S. After being offered what he calls “crummy” terms from U.S. banks that only knew the brash Tommy Hilfiger brand of old, Gehring led a 2006 $1.6 billion management buyout with the help of Apax, which had seen the strength of the company in Europe. After taking the company private, new worldwide CEO Gehring and second-in-command Grieder set about remaking stateside Tommy Hilfiger in its European image. They laid off 40% of the company’s employees and shrank the U.S. wholesale business, yanking low-quality merchandise from thousands of department store shelves. “The Apax investment was to ensure there was more money to make better products,” says Gehring. “And then we gambled on having to give much less discount. If we’d had to give the same level of discount, we would have killed ourselves.” The two made a decision to focus on just one retailer as its sole partner, arguably the most powerful in U.S. fashion and apparel: Macy’s. With almost 800 stores the New York-based chain already represented about 60% of Tommy Hilfiger’s wholesale business. Gehring wanted to boost that figure to 100%. Macy’s CEO Terry Lundgren remembers hashing out this exclusivity plan with Gehring in the summer of 2007, in the backyard at the home of Tommy Hilfiger’s first CEO, Joel Horowitz, during his daughter’s wedding. Horowitz had retired in 2005 but remained a Hilfiger friend and booster. “If we were going to do this, we were going to be fully committed,” says Lundgren. “We owned it, and we had to make sure we did everything in our power to sell it because he had no outlet other than us to move through the inventory.” With control of so much of the U.S. business, Lundgren and his team were able to ensure the Tommy Hilfiger clothing hitting the racks at Macy’s was up to snuff. Gone were the oversize jeans and tees. In came structure and slim-fit sweaters. The company considered another IPO and started the road show process in 2007, right before the credit crisis rendered a float impossible. “We couldn’t ship to customers, as they couldn’t pay,” says Gehring. The company switched focus from profit-and-loss to paying down its debt. By 2009, with $2.2 billion in revenues, Apax was itching to exit. That fall Emanuel Chirico, CEO of New York-based publicly traded clothing conglomerate Phillips-Van Heusen Corp., approached Gehring with an offer to join its umbrella of fashion brands that already included Calvin Klein and IZOD. In 2010 PVH bought Tommy Hilfiger for $3 billion, the biggest retail acquisition in years. In the U.S. the company has enjoyed PVH’s advantages of scale, able to negotiate with suppliers and customers alike. The company spends about $170 million a year on glossy-magazine campaigns and billboards in international shopping capitals, helping fuel a boom that’s seen European business grow to $1.5 billion today — 43% of the worldwide total. “Asia is up the most,” says Gehring, pointing to $135 million in revenues in China in 2013. “The farther east you go, the greater the growth.” Hilfiger remains chief creative officer and familiar face of the brand (and a huge draw in promotional appearances and ads for Macy’s, says Lundgren). He’s involved in the runway shows (like his New York Fashion Week rock ‘n’ roll spectacle), the advertising, the marketing, the overall aesthetic. He’s happy to leave the business side to Grieder and Gehring, who was promoted to vice chair of PVH this year . Says Hilfiger: “They run it like clockwork.” Source : Forbes