Mattel Closes Factories, as Toy Slump Weighs on Supply Chain

Unlike

Hasbro Inc.,

HAS -2.68%

a rival that has outsourced most of its production, Mattel until recently still owned 13 factories and employed thousands of production staff across the globe.

Closing the Montreal plant, which makes Mega Bloks, will affect about 580 workers, a spokeswoman said. She declined to say how many jobs were affected by the Asia closures. Mattel employs about 35,000 workers during peak manufacturing periods.

The manufacturing overhaul is part of Chief Executive

Ynon Kreiz’s

plan to turn around and stabilize Mattel, one of the world’s largest toy companies, which has struggled in recent years, from both weak sales in large divisions like Fisher-Price preschool toys and American Girl dolls and the industry upheaval caused by the liquidation of Toys “R” Us.

Weak sales have exposed inefficiencies in Mattel’s manufacturing network and led to some factories being underutilized. Mattel has sought to tackle various problems in the supply chain, from drastically reducing the number of products it makes to culling the number of colors available to designers.

Roberto Isais,

Mattel’s chief supply chain officer, said the changes have turned its supply chain into a competitive advantage. “We are continuing to optimize our manufacturing footprint, increase the productivity of our manufacturing infrastructure and achieve efficiencies across our global supply chain,” he said.

Mattel plans to retain some factories, like those that make Hot Wheels and Barbie, where the company would have an advantage over outsourcing to a third party. Executives say such a structure would allow Mattel to move more quickly to capitalize faster on trends.

The China factory made finished goods, while the Indonesia plant made tooling equipment used in other factories. The manufacturing will be moved to other Mattel facilities.

Mattel and Hasbro are scheduled this week to report earnings for the key holiday shopping period.

Already, there have been signs of caution. Research firm NPD Group Inc. said U.S. toy sales fell in the fourth quarter, which had six fewer shopping days between Thanksgiving and Christmas, leading to a 4% decline for the industry for 2019.

Target Corp.

blamed soft toy sales for its weaker-than-expected holiday season. Other toy companies, like

Spin Master Corp.

and

Funko Inc.,

have warned of a weak holiday period.

Some toy companies have expressed concerns that the coronavirus outbreak in China could disrupt the toy supply chain.

Isaac Larian,

CEO of MGA Entertainment Inc., a Mattel competitor and maker of L.O.L. Dolls and other toys, said a large Chinese toy factory is remaining closed for another week.

“The coronavirus is not solely China’s problem,” Mr. Larian said. “It will impact the global economy.”

Write to Paul Ziobro at [email protected]