Monday, 19 March, 2018

Lego Is Drowning in Bricks, and Its Sales Are Sinking Too

Image      Lego sales declined in Europe and North America Image Lego sales declined in Europe and North America
Nellie Chapman | 07 March, 2018, 16:09

Lego's sales fell for the first time in 13 years after the toymaker admitted on Tuesday that it made more toy bricks than it was able to sell last year.

"2017 was a challenging year and we are not happy with the financial result". Pre-tax profits slid 18% to 10.4bn kroner in 2017. Excluding the impact of foreign currency exchange, revenue for the full year declined 7 percent compared with 2016.

Christiansen joined Lego in October after nine years as CEO of Danish industrial group Danfoss, taking over from Briton Bali Padda who was in the post for just eight months. The company's net profit for the full year fell from US$1.56 billion in 2016 to US$1.29 billion. In December, consumer sales grew in seven of our 12 largest markets and we entered 2018 with healthier inventories.

The privately-owned company, famous for its colourful plastic bricks, could be facing its biggest test since flirting with bankruptcy in the early 2000s after a sudden halt to more than a decade of strong growth.

Lego said that apart from efforts to clear out its build-up of stock, consumer sales were flat, with a decline in established markets in North America and Europe balanced out with growth elsewhere including a double-digit upturn in China.

"There is no quick-fix and it will take some time to achieve longer-term growth", Christiansen said.

Lego added that it saw "strong potential" for the business after sales in China enjoyed double digit growth.

Classic ranges including LEGO City, LEGO DUPLO, LEGO Creator and LEGO Friends performed well, while the LEGO NINJAGO range benefitted from the release of The LEGO Ninjago Movie in September 2017.

The company will also open an office in Dubai later this year as it continues to expand operations in the Middle East and Africa.

It said in a statement: "In 2018, the group will stabilise the business and invest to create a platform for sustainable longer-term growth".