Mattel (MAT): More Dangerous Toys

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Mattel (MAT) appears to be ready to recall more toys made in China, based on reports from Dow Jones and Reuters. The company is taking a $30 million charge for about one million toys it recalled last month.

The new set of products appears to be for toy cars among other things.

Perhap Barbie and the GI Joe with the Kung Fu Grip were dangerous, but they never seem to have been recalled when Mattel got into those businesses. Now the company is in real trouble.

Mattel took a long time to recover from the fiasco of having Jill Barad as is CEO. She left in 2000. Early that year, the stock trade below $10. The rebuilding process got the shares to almost $30 this June.

Recalls may not be expensive from the point of view of initial write-offs, but they can destroy consumer confidence. Mattel’s shares dropped below $23 last week.

If the recalls cause consumers to move away from buying the company’s toys and Mattel warns on earnings for the third calendar quarter, the stock could drop a long, long way.

Perhaps it is a plot to destroy the American toy industry.

Douglas A. McIntyre