Mattel concentrates its sales with Walmart, Target and Amazon, and this connection exposes the company to the risk of a material adverse effect.
The company is a world leader in children’s entertainment specializing in the design and production of quality toys and consumer products.
Globally and during 2020, Mattel’s three largest customers (Walmart with $ 1.07 billion, Target with 620 million and Amazon with 470 million) accounted for approximately 47% of consolidated net sales.
There is also, within the countries of the International segment, a concentration of sales to certain large clients that do not operate in the United States, none of which exceeded 10% of consolidated net sales worldwide.
Clients and degree of concentration vary by region or nation.
In 2020, the company’s 10 largest customers together accounted for approximately 54% of net sales.
This concentration exposes Mattel to the risk of a material adverse effect if one or more of its large customers significantly reduced purchases for any reason, favored competitors or new entrants, or increased its direct competition with Mattel by expanding its private label business. .
That risk has been exacerbated by the Covid-19 pandemic, which has resulted in increased dependence on its most important customers due to forced or voluntary store closings by its specialty retail customers.
Customers make no binding, long-term commitments to Mattel regarding purchase volumes and make all purchases by submitting single purchase orders.
The company’s products are sold all over the world. Products within the North America segment are sold directly to retailers, including omnichannel retailers, independent discount and toy stores, chain stores, department stores, other retail outlets, and, to some extent, wholesalers.
The company also operates small retail outlets in certain corporate offices as a service for its employees and as a point of sale for its products.
Products within the International segment are sold directly to retailers and wholesalers in most European, Latin American and Asian countries, and in Australia and New Zealand, and through agents and distributors in those countries where the company does not have a direct presence.