Lego will cut jobs to simplify its structure
Revenue has dropped 5 percent
Lego Group is being forced to retrench after years as a toy-industry standout during which the Danish company leveraged its plastic brick sets and swiveled-arm characters with licensed movies, video games and theme parks to double its annual revenue to $6 billion.
Lego said Tuesday that its revenue for the first half of this year fell 5 percent from a year earlier, to $2.4 billion, its first revenue decline in 13 years. Net profit fell 3 percent, to $544 million.
Lego said the pullback was especially notable in mature markets such as the United States and parts of Europe.
In response, the privately held company said it planned “to reset the company” and would eliminate 1,400 jobs, or nearly 8 percent of its worldwide workforce of 18,200, as part of an effort to streamline its operations. Lego toys are sold in 123 countries.
“Unfortunately, it is essential for us to make these tough decisions,” Lego Chairman Jorgen Vig Knudstorp said in a statement. “We are disappointed by the decline in revenue in our established markets, and we have taken steps to address this.”
Building back from a near-collapse in 2004, Lego posted revenue of $6 billion in 2016, twice the level in 2011.
Snyder and other analysts said several factors led to the decline. Demand for some of its basic brick toys softened and sales of some newer lines, such as Lego Chima, have been disappointing. The company said some of its other classic lines — including Lego City, Lego Friends and Lego Duplo — remained strong.
Although Lego-related movies have done well at theaters, “they didn’t really generate the robust top-line sales growth as they thought” for related toys, Snyder said.
And Lego, as with all toy makers, faces heightened competition from smartphones and other digital technology that children increasingly enjoy, even though Lego has licensed video games and developed such tech-oriented toys as Lego Boost programmable robots.