Mattel Is Building on American Girl’s Success

Parents, watch your wallets. Mattel Inc. is planning a new shopping destination for girls that promises extreme sticker shock.

The El Segundo company plans to announce today that it will open its third American Girl Place store, in the Grove shopping center in Los Angeles’ Fairfax district.

The store, aimed at girls 7 to 11 and modeled on successful locations in Chicago and New York, will open next spring in the two-story space shuttered by toy retailer FAO Schwarz Inc. last year.

Building a premium toy store on the site of a failed counterpart may not seem like the smartest bet, but analysts say the two retailers’ approaches are different.

“A typical toy store sells commodity items,” said Kurt Barnard, president of Barnard’s Retail Consulting Group in New Jersey. “You can go inside and find toys for 59 cents. At American Girl, you are lucky if you get away with $79.”

Indeed, while FAO and other retailers have been forced to compete with discounters such as Wal-Mart Stores Inc. and Target Corp., American Girl caters to customers for whom cachet trumps price, selling them dolls, books and a bimonthly magazine.

American Girl’s sales -- $379.1 million in 2004 -- come primarily from its catalog, website and two flagship stores.

The unit accounted for a small slice of Mattel’s $3.2 billion in domestic sales last year, but company executives say it is one of its most profitable divisions, outperforming the signature Barbie line on a per-unit basis.

In the quarter ended March 31, Mattel reported that U.S. sales of American Girl products rose 25% -- the same pace at which Barbie sales fell, and a bright spot in a quarter in which revenue was flat. Mattel’s stock, down 6.5% this year, fell 45 cents Wednesday to $18.23.

American Girl’s most popular line consists of eight ethnically diverse characters from different periods in history, including Kaya, a Nez Perce doll from 1764; Addy, who escaped slavery in 1864; and Molly, an Irish immigrant growing up during World War II.

Each $84 doll comes with its own book and has accessories and furniture, such as Kaya’s $70 tepee and an $89 girls’ velveteen coat that allows owners of turn-of-the-century Samantha to match their dolls.

A line of modern dolls includes some that can be customized to look like their owners.

Rick Caruso, developer of the Grove, said he expected the store to be “a huge driver of retail sales” at the complex. He said he had been lobbying for an American Girl store well before the Grove opened in 2002, believing it would attract pilgrimages from other states and overseas.

That’s because American Girl stores are seen as a girls’ theme park of sorts, minus the rides.

“There are so many revenue-generating experiences within the store,” said Jim Silver, publisher of industry magazines Toy Wishes and the Toy Book.

At 40,000 square feet, the Los Angeles store will be twice the size of a typical chain drugstore.

It will have a 150-seat live theater for the Broadway-style “American Girl Revue,” a doll hairstyling salon, a bookstore and a cafe, where girls can take their dolls to tea or pick one to have lunch with -- and possibly buy.

The average American Girl shopping trip takes two hours, compared with the 20 minutes a customer spends in a typical retail store, said Ellen Brothers, president of the Mattel division. Brothers won’t say exactly how much her customers spend, but she says it is in the hundreds of dollars.

American Girl’s Chicago store was the first to open in 1998, the same year that Mattel bought the brand from Pleasant Co. for $700 million. Five years later, Mattel opened a store on Fifth Avenue in New York. That store attracted 1.3 million visitors last year, the company said -- and many of them probably had no idea their dolls were sold by Mattel.

Mattel lets the 20-year-old Middleton, Wis.-based unit operate as a stand-alone business, saying it doesn’t want to tamper with success.

Silver said American Girl ranked as the third-best-selling doll brand in the country, behind corporate sister Barbie and funky rival Bratz from MGA Entertainment Inc.

For Mattel, the American Girl dolls serve a niche that tends to have outgrown Barbie.

“When my kids started to be able to read, that marked the end of Barbie,” said Sean P. McGowan, analyst with Harris Nesbitt in New York. With American Girl, he said, that’s when most girls start appreciating the dolls. And many, he said, will display them, if not play with them, well past age 10.

“The mere fact that the doll line centers on reading differentiates it from the rest of the market,” he said.

So do its prices and exclusivity. And that’s one reason the Los Angeles store may be the last in North America.

“These are destinations, and that’s what we want them to be,” American Girl President Brothers said. “This is supposed to be a girl’s very special trip.”

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Who’s that girl?

American Girl

A line of historical dolls, books and accessories sold through catalog, Internet and at stores in New York, Chicago and soon Los Angeles.

U.S. sales (in millions)

2001: $340.8

2004: $379.1

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A day at American Girl Place

Lunch for two at the American Girl Cafe: $44

Two tickets ‘The American Girls Revue’: $60

Samantha Parkington 1904 doll and hardcover book: $90

Samantha’s travel outfit and parasol: $30

Samantha’s school desk: $68

Visit to the doll hair salon: $15

Total: $307

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American Girl’s share of Mattel’s revenue

For 2004, domestic sales only

Mattel brands: 47.1%

Fisher-Price brands: 41.1%

American Girl brands: 11.8%

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Source: Mattel