Recently, I took my daughter to the American Girl store at the Mall of America here in Minneapolis.This was no regular trip to the store. This was an event. We made reservations for lunch at the café, and the night before she readied her Kit Kittredge doll with a new outfit and hairdo.
I had no idea how big of a deal this was going to be, but I was looking forward to finding out what the fuss was all about.
And "fuss" was the right word for it. The store was packed with little girls and their mothers (and a few dads) making a day of shopping for all things American Girl.
As a purveyor of the markets, I likened the day to being in a gold mine. And this place is solid gold and only getting bigger.
Just how big is anyone's guess, but as a subsidiary of Mattel, Inc. (NYSE: MAT) the value of this asset is nowhere near what it should be given its potential. I know we will be regular customers until the dolls go into the closet 10 years from now.
Mattel has been struggling as the economy slips. Shares have lost nearly 50% of their value over the last year, and the company now sits with a market cap of 4.4 billion.
That value fell further on Monday as the company released less-than-stellar results for the fourth quarter. Analysts were expecting a profit of 71 cents per share. Instead, the company made only 49 cents per share.
The reason for the miss was a twenty percent decline in Barbie sales and a strong currency that made overseas sales worth less.
The good news was all about American Girl. Sales there increased by 5% in the quarter to $254 million. For the year, American Girl sales were at $463 million. From what I could say at the store the day I visited with my daughter, there is a huge amount of growth left on this tree.
In fact, I could argue that American Girl alone is worth more than where this stock trades today. Double annual sales twice and put a 2-times sales multiple on that volume gets you there.
American Girl is Mattel's ace in the hole. I would buy this stock on weakness.
Jamie Dlugosch is a contributor to OptionsZone.com.
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Reader Comments (Page 1 of 1)
2-13-2009 @ 10:18PM
mary andresen said...
American girl is truly a gold mine, however, if Mattel was considerate they would realized that young girls of all incomes love their dolls. Not all parents can afford $90 dolls! If they were an incon of Americana they would introduce a doll affordable so all little girls could have an American Girl doll. (If they choose). Imagine what that would do for their bottom line. My grandaughter actually had her AG doll stolen from her why? I guess because her parents count not afford to purchase a doll. The store is great, food is expensive and parents who can afford the cost will keep paying. However, too many young go without because they are too expensive and they are made in CHINA! Maybe President Obama will see other children will be treated equally!