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The Walt Disney Company (DIS), L Brands Inc (LTD), Mattel, Inc. (MAT): How Playing it Cute Makes You Money Now

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One company adds an extra $1.5 billion annually to its coffers from its cute couture. Another’s entire raison d’etre is a celebration of cute to the tune of $43.76 billion last year. And the third’s newest hot line, the epitome of cute, has endeared itself to legions of young women with double digit sales growth quarter after quarter.

A study published in the Journal of Consumer Culture examined the cultural implications of cuteness, from the Japanese culture of kawaii (think Hello Kitty and big eyed anime) to Western perceptions of cute and its relation to retail. Lead researcher Elad Granot’s curiosity over the prevalence of the word “cute” as used by females in retail situations prompted the study.

Several companies “get” cute and their stocks are winning from winsome. The “cutest” are L Brands Inc (NYSE:LTD), best known for Victoria’s Secret, The Walt Disney Company (NYSE:DIS), and Mattel, Inc. (NASDAQ:MAT). As Natalie Anger wrote in a New York Times article, “Whatever needs pitching, cute can help.”

The Walt Disney Company (NYSE:DIS)Dress the portfolio in PINK

The study singles out L Brands Inc (NYSE:LTD)’ PINK as a successful leveraging of cute. PINK is sold in Victoria’s Secret stores and online. The line of underwear, hoodies, sweats, and accessories is aimed at college age women featuring bright colors, cute designs, and soft fleecy fabrics. PINK adds $1.5 billion annually to L Brands Inc (NYSE:LTD)’ revenues. The company expects to double that number within a few short years.

Their appeal lies in the youthful design at the intersection of flirtatious and cute. It is non-threatening yet still trendy, not so overtly sexual as Victoria’s Secret lingerie.

My college student daughter and her friends love the line. Every time we stop in Victoria’s Secret it’s filled with young women in the PINK section chiming, “Sooo cute!” The line started in 2004 is now so successful they have earned their own freestanding stores…and the sincerest form of flattery, imitation by Urban Outfitters, Inc. (NASDAQ:URBN), American Eagle Outfitters, and Hot Topic with their own young, cute lines of lingerie.

L Brands Inc (NYSE:LTD) trades at a 19.44 trailing P/E with a 2.4% yield. The company reported in May that Q1 earnings rose 17% from Q1 2012. It has a strong insider hold at 18% with founder and CEO Leslie Wexner holding over 17 million shares.

The awwwww factor

The Walt Disney Company (NYSE:DIS) is the premier commercializer of cute; even its documentary March of the Penguins cashed in on cuteness. Disney cartoon characters have front facing big eyes like babies, adorably infantilized. Who else but Disney could make us love a rat like in Ratatouille? This has made Disney the biggest branding company in the world, licensing thousands of products.

The Walt Disney Company (NYSE:DIS) has been an outperforming stock as investors realize for the price of the media division (the films, the Disney network shows, ESPN, ABC) you’re getting the resorts and the licensing for free.

Disney is one of the world’s most recognizable brands. One reason is that cuteness is also associated with freedom from anxiety, which the study likened  to emotional carbohydrates or comfort food, dependably untroubling. There’s a reason they call Disney resorts the “happiest places on Earth.”

The Walt Disney Company (NYSE:DIS)’s earnings have been untroubled for the last few years after recessionary worries receded and people flowed back into the parks and onto the cruise ships, went to the movies, and bought Disney “stuff.” Since the lows of the recession the stock has tripled and shareholders have enjoyed double-digit EPS growth since.

At the March shareholder meeting CEO Bob Iger said, “In Fiscal 2012, we increased revenue by 3% to a record $42 billion, which led to a record $5.7 billion in net income, up 18% over the year before. And our earnings per share were up 24%, setting a new record of $3.13.” However, The Walt Disney Company (NYSE:DIS)’s trailing P/E at 19.33 and 1.20% yield aren’t as cute as they used to be as the stock has moved up 35% in the last year.

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