HomeNEWSIs the block party over? Lego’s impressive run comes to an end

Is the block party over? Lego’s impressive run comes to an end

Danish company, Lego, has announced its first profit and sales drop for more than a decade. The company saw a dip of eight percent in sales due to an increase demand for more modern toys.

In a tough year for Lego, the family-run brand has said sales dropped eight percent following a “challenging year”, that also saw the retailer cut 1,400 jobs.

While sales declined, profit also fell by 17 percent. Its first decline since 2004.

Lego’s net annual profit sits just under $1.5 billion USD. Stilling coming far above its competitors Mattel and Hasbro. According to the official financial report, net profit for the period ending December 31 was down $1.6 million when compared to the same period in 2016. 

From left: Revenue and Profit before tax

Revenue was down $2.9 million on a year to year basis. 

Niels Christiansen, who took over as Lego’s chief executive five months ago, said there would be “no quick fix” and it would take years for the company to return to growth.

“2017 was a challenging year and overall we are not satisfied with the financial results,” Christiansen said. “We started 2018 in better shape and during the coming year we will stabilise the business by continuing to invest in great products, effective global marketing and improved execution. There is no quick fix and it will take some time to achieve longer-term growth.”

Lego said part of the collapse in profits was due to the company producing too many of its colourful bricks, which it was forced to sell off cheaply to make room in its warehouses. Blame was also placed on overlapping layers to its inner structure, which was in part way responsible for the cut jobs.

Announcing more changes to its models, Lego has also made the effort to become more sustainable. Producing Lego pieces made from plant-based plastic sourced from sugar cane, rather than plastic.

Lego has joined forces with WWF to support and build demand for sustainably sourced plastic, and has joined the Bioplastic Feedstock Alliance (BFA) to ensure fully sustainable sourcing of raw material for the bioplastics industry.

The news of Lego struggles adds to the speculation that a brand who stays complacent in its models will face challenges. Such as Toys “R” Us going into administration earlier this week.

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