Mattel Faces Challenge of Modernizing American Girl Dolls at 40th Anniversary

• American Girl sales have fallen to just one-third of peak levels (from $600M+ to $200M annually), with dolls priced at $125+ facing pressure from lower-cost alternatives and digital entertainment competing for children's attention
• Mattel reported Q4 2025 revenue of $1.77 billion, missing Wall Street expectations due to weak holiday demand and heavy discounting, while its doll and preschool categories declined 7% and 17% respectively
• The brand is targeting adult collectors or 'kidults' as a growth strategy, releasing modernized versions of original characters and its first adult-focused book, while maintaining retail presence at seven U.S. stores down from 15 in 2019

Summary: Mattel's American Girl Dolls Face Modernization Challenges at 40th Anniversary

As American Girl celebrates its 40th anniversary, parent company Mattel confronts significant challenges modernizing the iconic brand amid shifting consumer behaviors and digital competition.

Financial Performance:

• American Girl has posted five consecutive quarters of sales growth, but remains substantially below peak levels
• Annual sales fell from over $600 million at mid-2010s peak to approximately $200 million in 2023—a decline of roughly 67%
• Mattel reported Q4 revenue of $1.77 billion, missing Wall Street expectations due to weak holiday demand and heavy discounting
• Mattel's global dolls sales fell 7% in the latest quarter; infant/toddler/preschool segment declined 17%

Key Challenges:

• Premium pricing ($130+ per doll, excluding accessories up to $275) limits customer base in cost-conscious environment
• Digital competition from tablets, gaming, and streaming services eroding traditional toy play
• Store footprint reduced from ~15 locations in 2019 to seven U.S. stores currently
• Activist investor Barington Capital pushing for portfolio streamlining and potential brand divestitures

Strategic Response:

• Targeting "kidult" consumers (adults buying toys for themselves), a growing market segment that now exceeds spending by children ages 3-5
• Releasing modernized versions of original six historical characters for 40th anniversary
• Publishing first adult-focused book featuring character Samantha in her 1920s adulthood
• Expanding digital presence through YouTube, TikTok, and Roblox platforms
• Diversifying characters, including 2026 biracial "Girl of the Year" Lila

Market Context:

Analysts view the brand as "stabilizing" rather than recovering, with questions about strategic essentiality within Mattel's broader portfolio amid industrywide pressures from tariffs and changing play patterns.