Mattel Denies Knowing Products Violated the Law – How Will MAT Stock React?

June 5, 2009 — By

Following investigation, CPSC staff accused Mattel (MAT) of knowingly importing and selling toys that contained high levels of lead in violation of the law.  The toys were recalled by the millions during the summer and fall of 2007 in a media frenzy that awakened US citizens and government officials to the need for higher standards, more thorough monitoring and harsher consequences for violators.  Mattel will pay those consequences as one of the largest civil penalties in CPSC history, a $2.3 million settlement, was announced today.

Commissioner Moore commented that “This penalty should serve notice to toy makers that CPSC is committed to the safety of children, to reducing their exposure to lead, and to the implementation of the Consumer Product Safety Improvement Act.”

While manufacturers may sit up and take note, for a company the size of Mattel at $5.9 billion in annual revenue, $2.3 million won’t be felt at all on the bottom line, and determining whether the announcement has any impact on Mattel’s immediate stock price will have to wait a few days.  Although the deal was signed on May 29, 2009, it was not announced until today, after the market closed on a Friday.

In a touch of irony, The Motley Fool’s James Early mentioned the stock in his “The Best Stock to Own” post, published just an hour or two before the settlement announcement:

Speaking of companies with strong brands, I’m taking a hard look at Mattel (NYSE: MAT), which manufactures a portfolio of iconic toys, including Barbie, Hot Wheels, Fisher-Price, and Matchbox. The stock has been fairly volatile over the past few years, thanks to a string of product recalls in 2007 and dicey consumer demand of late — but I think brighter days lie ahead as soon as consumer confidence rebounds.

Perhaps today’s settlement will signal to investors the end of a difficult period for Mattel and a chance to finally move forward.   However, the question remains whether today’s settlement will settle the matter in the minds of consumers.  As long as Mattel can avoid further missteps, my guess is that it will and, other than some minor residual effects from the reminder of Mattel’s faltering, consumers will soon get over it.  After all, our kids love Barbie, Dora, Elmo, Sarge and the rest – we’ve been searching for reasons to forgive Mattel for over a year now.

As part of an ongoing study of the financial impacts of product recall, WeMakeItSafer will be watching the Mattel stock closely over the next several weeks.

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1 Comment

  1. Stock Value says:

    Yes I too hope that the issue should settle as soon as possible because kids without toys look very sad.
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    susan cripllar