As American Girl turns 40, Mattel struggles to introduce dolls into a new era

The air smells faintly of vanilla. Young girls run among the doll displays, holding miniature shirts and sequined shoes. Under glittering chandeliers, those of the brand iconic red boxes line planks with museum-like precision. Hairdryers buzz in the Doll Salon, and downstairs, pink frosted cupcakes land on cafe tables before dolls sit upright in their miniature high chairs.

“It feels timeless,” he said Jamie Cygielmanglobal head dolls for Mattelthe parent company of the brand.

And yet, behind the scenes, the business of American Girl dolls isn’t what it once was.

If American girl turns 40the brand is dealing with more modern challenges: digital competition, changing gaming patterns and an aging, more cost-conscious customer base.

“The anniversary comes at a precarious time for American Girl and the entire doll industry,” the spokesperson said Jaime Katzan analyst who keeps an eye on Mattel Morning star. “Children are more digital in playing, and the [American Girl] brand is having a hard time.”

About a decade ago, at its peak, American Girl took over $600 million on annual turnover. By 2023, annual sales had fallen to about $200 million – just a third of previous levels.

While American Girl has shrunk significantly since the mid-2010s, the brand has recently posted five consecutive quarters of gains. sales growth – one of the few stable artists within Mattel’s portfolio.

“Growing from a base that’s down more than 60% doesn’t mean the brand is back. It means it’s stabilizing,” Katz told CNBC.

Earlier this month, Mattel reported sales in the fourth quarter of $1.77 billion, which fell short of Wall Street expectations after lighter-than-expected holiday demand and heavier discounts weighed on margins. Earnings per share also lagged, and Mattel gave a lower than expected earnings forecast for 2026.

Mattel shares are down about 19% since the Feb. 10 report and are down about 20% over the past year. Citi And JPMorgan also downgraded the stock after the results.

“People are watching Mattel this year … and waiting with bated breath because they’re spending a ton and it seems unlikely they’ll rake in big profits,” Katz said.

Even before the The Covid pandemic forced American Girl to reduce its size retail footprint from approximately 15 stores in 2019 to seven U.S. locations today, the brand has faced increasing competition from cheaper alternatives at big-box retailers such as Goal Line “Our Generation”..

An 18 inch traditional American girl usually starts at $135not including accessories, which can cost as much as $250 for one bunk bed or $275 for one beach cruiser.

The premium price was once a sign of quality and prestige for many parents, says Laura Tretter, co-host of the American girl women podcast. But in an inflation-conscious environment, the customer base has shrunk, Katz said.

“Parents are currently more selective when it comes to their discretionary spending,” says Katz. ‘That price [for an American Girl doll] looks steep for many households.”

Across the toy industry, companies, including competitors, like it Hasbroare struggling with how to get kids interested in their products, especially amid uneven consumer spending and, most recently, trade uncertainty.

“There are so many more things nowadays that a child can be tempted to play with,” Cygielman told CNBC. “There is also more competition these days and we have seen in the past that tariffs can have an impact on the toy market, but we are adapting.”

For many children, gaming has shifted to tablets, gaming subscriptions and short video.

“The definition of ‘toy’ has changed,” Katz said. “An iPad or Nintendo Switch competes directly with a doll. There are simply more claims on the same discretionary dollar.”

Overall, Mattel’s doll and preschool categories have seen steady declines over the past three quarters, even after the halo effect of the 2023s. “Barbie” movie. Global sales of dolls fell 7% in the last quarter, while the infant, toddler and preschool segment fell 17%.

Struggling sales for American Girl and Mattel’s Fisher Price brand motivated activist investor Barington Capital in 2024 to push the company to streamline its portfolio and improve returns, raising the possibility selling the to notice.

“American Girl is not a big part of Mattel’s overall financial profile,” Katz said. “Yet the question for investors is not whether the brand is loved. It is whether it is strategically essential. It put pressure on profits.”

Inside the Rockefeller Center store, the industry headwinds feel far away.

During a recent visit, Lisa Kandoski stood there staring at her Molly McIntire – the era of the Second World War heroine adorned with round wire-rimmed glasses, a navy blue argyle sweater and braids tied with red ribbons — just like the doll her grandmother said Kandoski put under the Christmas tree in 1990.

“It’s not just a doll,” a misty-eyed Kandoski, now 40, told CNBC. “I kind of realized the impact Molly had on me as a child. She taught me that you could be brave even when the world was scary, that you could ‘do your part’ even when you were little. She shaped who I am.”

That emotional alchemy has defined American Girl since it disrupted the doll industry in 1986. At that time, the market was dominated by fashion dolls that reflected adulthood, or baby dolls to rehearse motherhood.

The original six American Girl characters – Samantha, Kirsten, Molly, Felicity, Addy and Josefina – came with books on topics rarely taught to young children, such as child labor or racism, and all the dolls were covered girlhood itself as a formative stage.

“American Girl remains a moral compass for many of us,” says Tretter of the American Girl Women podcast. “I love that girls today are still receiving positive messages about inclusivity, friendship and going through difficult changes.”

Over time, American Girl expanded into publishing, films, and retail while diversifying its characters, as in 2026 “Girl of the Year”, Rachel Reyesa biracial DJ and animal rescuer who helps run her family’s paleta shop in Kansas City.

The brand’s whimsical seriousness became a differentiator and fostered generational loyalty, says Justine Orlovsky-Schnitzler, a folklorist and author of ‘An American Girl Anthology: Finding Ourselves in the Pleasant Company Universe.”

Look no further than the Doll Hospital, where white-coated “doctors” assess patients, fit wheelchairs, perform eye exams and apply miniature casts for doll owners of all ages.

“That’s why people return,” Orlovsky-Schnitzler said. “You’re not just buying plastic and fabric. You’re reimagining a version of yourself.”

And even though the dolls remain preserved in the innocence of childhood, their original owners, now adults, continue to return to American Girl podcasts, memescosplay and fanfiction.

Some pass their dolls on to their children. Others buy new ones for themselves.

“There is something powerful about handing over the doll you once slept next to to your daughter,” Orlovsky-Schnitzler said. “It’s also just as comforting to go back to the days of your youth with your own doll.”

Mattel is trying to turn that nostalgia into broader sales growth.

So called “kidult” consumers – adults who buy toys for themselves – have become a coveted demographic. By means of end of 2024According to market research firm, spending on toys for adults aged 18 and over was higher than for children aged 3 to 5 Approx. That cohort continued to drive the industry growth by 2025.

Mattel has increasingly sought to monetize its intellectual property through publishing, collectibles, entertainment and digital platforms. In interviews and calls with investors, Mattel CEO says Ynon Cross has said that mobile games and interactive platforms are particularly promising areas.

“However, nostalgia must translate into sustainable sales and revenue growth,” Katz said. If you rely too much on adult collectors, a brand risks ‘aging out alongside its original audience’. If you pivot too aggressively toward digital trends, you risk diluting what makes them different.

Competitors have done the same. Lego, for example, continues to release more brick building sets aimed at adults flowers, art and collectibles based on millennial pop culture favorites such as the 1990s TV hit ‘Friends.”

For American Girl, the 40th anniversary offers a natural turning point to find a balance between child and adult fans, Cygielman said.

American Girl is released modernized versions of the original six characters and publishing his first book for adults, focused on Samantha Parkington and is set during her adulthood in the 1920s.

At the same time, the brand is working to keep the next generation engaged through contemporary ‘Girl of the Year’ storylines and investments in digital platforms including YouTube, TikTok and ‘American girl world” on Roblox.

“Nostalgia is a starting point, not the end game,” Cygielman said. “The question is how do we extend that emotional equality to new platforms and new audiences.”