Three years ago, the blockbuster movie Barbie looked like proof that Mattel could turn its toy brands into something much bigger. The movie grossed more than $1.4 billion worldwide and fueled a surge in Barbie toy demand and licensing revenue, boosting the brand's gross billings 16% during the third quarter of 2023.

That glow didn't last. Barbie billings have since declined, and Mattel's profit has come under even more pressure. The stock is down 27% from its February peak, longtime CEO Ynon Kreiz stepped down last week, and major shareholders are pressing the company to consider a sale as potential buyers begin to circle.

On Wednesday, privately held toy maker Zuru Group was reported to be considering a takeover bid for Mattel. Neither company has immediately responded to Barron's request for confirmation. The report comes less than a week after a report that Authentic Brands Group, a brand-management and licensing company, was weighing an offer -- also unconfirmed by the companies.

Mattel shares rose nearly 19% on Oct. 1 after the Authentic news; they were up 2.8% Wednesday on the Zuru report.

The recent takeover interest underscores two increasingly uncomfortable questions for Mattel investors: If Mattel owns some of the best-known toy brands such as Barbie, why has the company struggled to create the same value for shareholders? And would those brands be better run in someone else's hands?

Some major investors are already making their stands clear. In a letter made public on Oct. 5, Ariel Investments, which owns 5.4% of Mattel, has urged the board to consider a sale, merger, or major divestiture. Southeastern Asset Management, with a more than 4% stake, made a similar push in May, calling on the company to explore strategic alternatives including going private or selling itself.

The investor pressure isn't surprising: Mattel's brands remain valuable, but its earnings have been moving in the wrong direction.

It isn't that Americans have stopped buying toys. Circana data show that U.S. toy sales actually rose 6% in 2025 as units increased 3%. But much of the industry's growth has been concentrated in categories like trading cards, games, and building sets, while dolls were among the weaker areas.

Mattel is seeing a similar split. Net sales rose 8% in the first half of 2026, but much of the momentum came from toy cars, digital games, and action figures. Dolls and preschool toys, including some of Mattel's most established franchises like Barbie, continued to lag.

While the Barbie movie demonstrated the value of Mattel's intellectual property, the company hasn't been able to translate that IP into durable earnings growth.

Barbie's gross billings fell 11% in 2025, and were down another 16% in the first half of 2026. Mattel is rolling out new Barbie content and products to revive demand, and management expects the brand's performance to improve later this year and return to growth in 2027.

Trade-policy uncertainty has also pushed many U.S. retailers to smaller, later orders and away from direct importing. Mattel said those shifts hurt shipments even as consumer demand remained positive.

Profit is the bigger problem. Mattel's operating income fell 21% in 2025, and the decline accelerated this year: through the first six months of 2026, the company posted an operating loss of $92 million, compared with a profit of $26 million a year earlier, even as the company's total revenue rose 8%.

Tariffs, inflation, unfavorable currency moves, and higher royalties paid on licensed brands have all weighed on gross margins, while Mattel has stepped up advertising and other spending to support growth. When U.S. consumer purchases rose less than Mattel expected in December, the company responded with heavier discounts, which further squeezed margins.

There are reasons the outlook could improve. Mattel has been reducing its dependence on China, leaving it less exposed to tariffs than much of the toy industry. It has also been cutting costs, exiting weaker product lines, and putting more resources behind faster-growing categories.

The company is investing heavily in digital games and entertainment to earn more from its brands beyond selling physical toys. Management says those investments should stop weighing on earnings in 2027, but Southeastern has questioned the spending, arguing that shareholders may be better served by a sale rather than waiting for the long-term transformation to pay off.

Wall Street is divided on the stock, with analysts' target prices ranging from $13 to $23, according to FactSet. The stock closed at $16.37 on Wednesday.

Investors may not have to wait long for more clarity. Mattel is expected to report third-quarter results later this month, when investors will likely learn about this year's holiday toy orders, and how rising costs have impacted profits. Investors will also be looking for any change in strategy under incoming CEO Roger Lynch, particularly around Mattel's heavy spending on digital games and entertainment.

The takeover interest adds another wrinkle. Authentic Brands has reportedly considered paying more than $20 a share for Mattel, suggesting a meaningful upside if a deal materializes. But no formal sale process has been announced, and some of the takeover premium is already reflected in the shares after their recent rally.

For investors considering the stock now, the bet is partly on a potential sale -- and partly on Mattel improving its business even if a buyer never comes. Barbie showed what Mattel's brands can be worth on the big screen. The question now is whether the company can prove they are worth as much for its shareholders.