How much does lego make a year ? While other toy companies struggle with an inflation-fueled sales slump, Lego is building positive results brick by brick. The privately held Danish toymaker saw revenue rise 1% during the first six months of this year, reaching 27.4 billion Danish krone, or about $4 billion. Meanwhile, publicly traded rivals such as Mattel, Hasbro, Funko and Jakks Pacific
have all reported double-digit revenue and sales declines so far this year.
“I think what makes me very satisfied is this fact that we continue to outgrow the industry,” CEO Niels Christiansen told CNBC. “The good thing for us is that every year over the last four or five years, we’ve been outgrowing the market by 10 percentage points … that means we’ve been taking market share consistently and that has continued, that’s super important.”
Toy companies across the industry saw massive gains during the Covid-19 pandemic, as parents looked for ways to keep their kids occupied during lockdowns. Adults, too, returned to the toy aisle to stave off boredom.
Lego built on pandemic-era growth, boosted by a diverse slate of products that cater to kids and adults alike, while outperforming the industry and zapping up market share.
Of course, the company has not been immune to macroeconomic pressures, particularly higher costs for material, shipping and energy.
Net profit for the first half of the year reached 5.1 billion Danish krone, or about $742 million, down 17% from the same period in 2022.
Raw material costs were a major expense for the company during the first half of the year, but Christiansen said he expects that to lessen going forward as prices come down.
Lego has offset some of the higher shipping costs by placing manufacturing plants near key markets. For example, the U.S. gets its Lego products from a factory in Mexico. That supply chain will shorten in the next two years as the company opens a new plant in Virginia.
Additionally, Christiansen said strong demand for Lego’s eclectic selection of building sets has helped narrow the gap. Consumer sales grew 3% during the first half of the year.
Christiansen pointed to the strength of Lego’s brand and its diverse product line that hits on a variety of “passion points” for its strong performance so far in 2023. These products range from themed sets of Star Wars to buildable muscle cars and cityscapes.
The company is growing its portfolio to around 750 products this year. About 48% of that portfolio will be new, Christiansen said. That’s on par with previous years and is part of the company’s strategy for having fresh and relevant sets for all consumers.
The company also has been reaping the benefits of opening stores in new markets, particularly in China. So far in 2023, the company opened 89 shops worldwide, with 54 of those in China. The region is newly exposed to the iconic building bricks and physical locations have helped show adults and children how to play with Lego.
“We believe we will end the year at a single-digit growth rate,” Christiansen said. “I believe we can continue to outpace the market.”
Lego reports increased profits and sales
The company said net profit rose to $2b. Sales were up 12%, while revenue grew 17% to $9.2b. CEO Niels B. Christiansen called 2022 “a milestone year” as the company celebrated its 90th anniversary, saying the company “landed the year beyond expectations on the back of exceptional growth last year and despite challenging market conditions.”
Lego increased prices on about a quarter of its products, due to inflation, but Niels added: “Low-cost products were not affected. The increase was chiefly on our expensive products. Despite that, we saw our sales increase.”
The group said it had been affected by macroeconomic pressures during the year – including the war in Ukraine and increased material, shipping and energy costs – but has been working towards offsetting some of those costs by introducing manufacturing plants near key markets. The US supply chain will shorten in the next two years as Lego opens a new plant in Virginia, rather than use the factory in Mexico that currently supplies the region.
Continued strong demand for its product range, among both children and adults has helped maintain sales, and Niels said this was partly down to the breadth of the product that Lego currently offers. “People are buying more,” he said. “It’s not price increases driving growth, if anything it’s people buying bigger and more complicated sets. It’s a combination of volume and value.”
Lego’s diverse product line has been designed to hit on a variety of “passion points” which have helped its strong performance in 2022. These products range from themed sets of popular licences such as Star Wars and Harry Potter to botanical flower arrangements and muscle car replicas. Last year, new products made up 48% of the company’s range as part of the company’s strategy for having fresh and relevant sets for all consumers. Lego has also worked to diversify its price points, as inflation and uncertainty negatively affected consumers over the past year, offering sets for all budgets.
Lego said that there was growth in all markets, particularly in the Americas and Western Europe. The company opened 155 stores worldwide last year to reach 904 locations in more than 130 countries. Around half of the new openings were in China, and Lego is planning to add 145 additional locations worldwide in 2023.
With store footfall beginning to exceed 2019 levels, in-store experiences (such as the recent Lego Friends activations) remain a high priority for the brand. Online sales were also said to be seeing “good traction”.
Collaborations with other high profile brands were highlighted , including one with Louis Vuitton to create windows and store displays for the Christmas season tied to the 200th birthday of the luxury fashion house. “By doing a partnership with others, we can reach customers in a different way,” added Niels. “In the case of Louis Vuitton, we hope to reach women, mothers. We hope to have more girls playing with Lego.”
Lego opened stores and produced more toys
The maker of colorful building bricks, which is owned by the billionaire Kirk Kristiansen family, opened 155 new branded stores last year and increased production at three of its five factories. It’s also working on building two new large facilities in Vietnam and the United States. The company said it expects to win market share again this year with “single-digit” revenue growth.
Lego’s results were better than the company had expected, CEO Niels B. Christiansen said.
Earnings momentum “was driven by the investments made during this time, which are both paying off now and establishing a foundation for long-term, sustainable growth,” the CEO said in the statement. “We plan to accelerate investments in strategic initiatives in the coming years.”
Lego plans to hire 500 more digital experts in Denmark, the United Kingdom and China in addition to as many as 6,000 workers for its new factories in the U.S. and Vietnam in coming years, Christiansen said.
Other toymakers see declining demand
Lego’s hiring spree is an outlier in the the toy market, which shrunk last year. Its biggest rivals, Mattel Inc. and Hasbro Inc., both reduced headcount in 2022.
Lego’s U.S. rival Mattel Inc., which owns the Barbie brand, last month said it expects no revenue growth this year, while the other large U.S. toymaker, Hasbro Inc., said it sees a contraction. Hasbro cut its workforce by another 1,000 jobs, about 15% of workers, after a poor holiday season. Hasbro said the digital gaming business, including the Dungeons & Dragons and Magic the Gathering games, performed well. However, its traditional toy business faltered. Both companies said toy sales were down after a boom during the pandemic.
Lego as a symbol of resistance
In 2022, Lego made headlines for its symbolism following the Russian invasion of Ukraine. The toy manufacturer said it had “paused shipments of products to Russia given the extensive disruption to the operating environment,” and donated more than $16 million to humanitarian organizations.
Polish illustrator Paweł Jońca was inspired by Lego’s blue and yellow similarity to the Ukrainian flag. He created a poster showing a red bear representing Russia, stepping on blue and yellow Lego blocks representing Ukraine.
“The proportions and colors refer to huge Russia and smaller Ukraine,” Jońca said. “The heaviness of the aggressor and the tenacity and persistence of the defender. Most viewers associated stepping on the block with their own experience and immediately thought, ‘Hope it hurts!’”
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